In this concise video, Linda Artesani of Artesani Accounting shares essential best‑practice tips for law firms to stay compliant with trust accounting, especially regarding IOLTA (Interest on Lawyer Trust Accounts). She explains what an IOLTA account is, why its interest funds support legal aid, and stresses that client funds are not the firm’s money until earned. Key dos include avoiding commingling of trust and operating funds, performing a three‑way bank reconciliation, maintaining a detailed client‑by‑client listing of trust balances, promptly depositing retainer checks, and using a regular billing cycle to move earned fees out of trust. She warns against moving money before work is performed, as that constitutes theft, and highlights the risks of audits and potential external physical audits for non‑compliance. Artesani recommends starting with affordable practice‑management software such as LeanLaw or the more robust Clio, noting their built‑in time tracking, trust‑fund handling, and reporting features, and suggests seeking ABA discounts. The video concludes with a call to action for firms needing assistance and an invitation to subscribe for more law‑firm accounting guidance.
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Hi there, Linda Artesani, Artesani Accounting. So I thought today I would just give you my top tips that I find with working with attorneys and law firms, that there's a lot of times they'll come to us and they just flat out don't have their records even tracked. And really, when it comes to IOLTA, we want to make sure that we manage that account properly. So remember, it's not your funds until you've earned the money. So you're taking in client deposits and putting them in a special bank account to be held. Sometimes that bank account's called an IOLTA account, and an IOLTA account is Interest on Lawyer Trust Accounts. That's all it means. It's an acronym, and the money sits there, and sometimes it's a significant amount of money, and that money will be used for— the money gains interest, and the interest is actually used since 19— I think it's 1981 that they use that money. It actually goes— the banks collect it, they bring it to the proper authority that will take that money, and they save it for people who don't have the money to afford an attorney to represent them, and that's what the funds are actually used for. So it's got a good purpose. You'll see that money sweep in as interest and sweep out as interest, so you'd never see it stay. And all the funds there inside that one account may belong to multiple clients, and you really need to track it, which is where we run into that 3-way bank reconciliation. So I'm gonna give you a few of my most important tips to keep you compliant with your, with your record keeping. The first don't is don't commingle your funds. And this is really important. You don't want to accidentally move money from IOLTA or trust if it's not been earned. So it's really important that the action of doing the work for the client happens, and then you create the invoice and then apply that trust money to the invoice by moving it to operating. But there's an action of an invoice and a payment. So you don't want to skip that in your record keeping. You want to show that you've— you did some work for the client, and then that money is being moved over. You never want to move that money over before any work has been done. That's considered stealing. It's a real big no when it comes to trust accounting. Compliance dictates proper recordkeeping. So you can't— I see sometimes where attorneys will start out and they're like low budget. They're just starting as in their law firm and they end up starting out with just a spreadsheet and that becomes quite unmanageable. I highly recommend as an attorney that you get the software Start off with like a LeanLaw, which is very inexpensive. It'll track your time and it handles the complexity and behind the scenes of the transactions required to move the funds out and keeps you compliant. You can never overstate and take too much out that you didn't actually have. That's even worse for you if you give back more than you received. But it's got a lot of places in there that you can track, and there's also a lot of great reporting. As you start to grow, you'll be able to have that. So why not start in that place? We also like to use Clio if you want more of a robust program with practice management. Clio again will do all the same things LeanLaw does. It'll actually have some intake forms and places to store documents. It's a little bit more expensive, but it's worth getting involved in that. And you may be able to even get a discount from your local ABA. I think they give 10% off. So you might wanna look there. You wanna ensure, as a do, you wanna ensure that your client funds are kept completely separate. They're separate so you know you've got an account listing. If you've got $10,000 in your IOLTA trust account and you have 10 individual deposits or retainers, from 10 different clients, you wanna have a listing of those 10 clients that equals that $10,000. So it's really important. And then if you do get a retainer payment, don't hold the check. Make sure you get that money into the bank account for the client. You don't wanna hold onto it and don't put it in the bank account. You want to actually do that action to maintain good records. It's important, really important to maintain the good records and making sure that you have this workflow in place, that the check's not just sitting on the desk, 'cause you really wanna make sure that it gets into the bank. a timely fashion. And then have a regular billing cycle. It's important for your practice to make sure that you are capturing the time, capturing the expenses, and then billing that out to your client, moving the funds out of trust. So it's a lot of working parts. Obviously, if you need help with that, something our firm does, reach out. We'd love to help you. If you're new to this line of work with these kind of clients, attorney clients, reach out. We have the Accountants Law Lab. So it's a little short video, but I hope it's helpful to help you manage your firm and some great tips to really stay compliant. That's the most important thing. You never want to be audited, and sometimes audits happen randomly. So it's important because if you're found to be out of compliance, there's a lot of rules, and you might even have to have an outside physical audit at a certain period of time, like annually or biannually, depending on the infraction that happened if you didn't take care of the funds. It's just really important to stay compliant and keep all those headaches away. So on that note, I hope to see you all next week. If you want to subscribe to our channel, please please hit the subscribe button, that A, and follow us for more videos on law firm accounting. Bye now.
