One way to do a three-way reconciliation is manually. First, you should look at every open individual client ledger balance. Then, add up this balance to get the total of the individual client ledgers.
Best practices encourage Three-Way Reconciliation no matter how many trust accounts are involved. In the Three-Way reconciliation, there are three items in the process: the trust ledger (internal books), the client ledgers, and the trust account bank statement.
After all, in many states, the state bar only requires that a lawyer perform this level of in-depth reconciliation on a quarterly basis, accepting a two-way reconciliation between the trust ledger and the bank account statement in the months in between.
Assume that a lawyer has three clients with balances in a trust account as of September 30, 2017. The lawyer should have three separate client ledgers tracking the cash flow into and out of the trust accountâone for each client.
After all, in many states, the state bar only requires that a lawyer perform this level of in-depth reconciliation on a quarterly basis, accepting a two-way reconciliation between the trust ledger and the bank account statement in the months in between. Nevertheless, a wise lawyer will reconcile down to the client ledgers every month.
Three Balances, All Equal You compare the latest bank statement (the âbank balanceâ) to your check register (the âbook balanceâ), correcting for checks or deposits that have not cleared yet. If you and the bank show the same balance, then you are fine.
A three-way reconciliation is simply making sure that the following three numbers match: Bank account balance. Book balance. Balance by matter.
5 Easy Steps of Trust ReconciliationStep 1: Make sure your deposit records are complete. ... Step 2: Locate any uncleared deposit transactions. ... Step 3: Confirm your disbursement records. ... Step 5: Account for uncleared transactions.
Given below are some other reconciliation types that we normally come across in the financial world.Credit card reconciliation. Credit card reconciliation is similar to bank account reconciliation. ... Balance sheet reconciliation. ... Cash reconciliation.
Every state bar association requires that an attorney reconcile their trust bank statement to their clients' individual balances either monthly or quarterly. This reconciliation process is one of the more important rules in trust account management.
Reconciliation is the accounting procedure that proves your trust transactions were recorded accurately and provides proof that there are sufficient funds in trust.
Bank Reconciliation: A Step-by-Step GuideCOMPARE THE DEPOSITS. Match the deposits in the business records with those in the bank statement. ... ADJUST THE BANK STATEMENTS. Adjust the balance on the bank statements to the corrected balance. ... ADJUST THE CASH ACCOUNT. ... COMPARE THE BALANCES.
Run regular three-way reconciliations. Record any deposits or disbursements from client trust accounts....During an audit, law firms can expect auditors to want to see:Recent bank statements.Any cancelled checks (images may suffice)Receipts and disbursements journal.Individual client ledgers.Check register.
For Firms that use Trust bank accounts, reconciling these trust accounts is a very important aspect of ongoing compliance and administration. Reconciliation also gives you an overview of and clarity across your trust accounting records - matching them with transactions on your bank statement.
Bank reconciliation stepsGet bank records. You need a list of transactions from the bank. ... Get business records. Open your ledger of income and outgoings. ... Find your starting point. ... Run through bank deposits. ... Check the income on your books. ... Run through bank withdrawals. ... Check the expenses on your books. ... End balance.
Bills described as reconciliation bills can pass the Senate by a simple majority of 51 votes or 50 votes plus the Vice President's as the tie-breaker. The reconciliation procedure also applies to the House of Representatives, but it has minor significance there, as the House does not have a supermajority requirement.
The four major parts of the sacrament of Reconciliation are: 1) contrition, 2) confession, 3) penance, 4) absolution.
Remember, Attorneys have the following obligations: (1) the duty to maintain records as described in R.1:21-6; (2) the duty to segregate client, third party and/or shared interest funds from the firmâs funds (an Attorney Trust Account is used to accomplish this) as described in R PC 1.15 (a); (3) the duty to maintain the integrity of client, third party and/or shared interest funds (please do not borrow funds from your Attorney Trust Account, or disburse them before the collection/clearing of a deposit, its not worth it and there are other means of obtaining a loan); and (4) the duty to account for client and third-party funds in their possession (escrow (ex. real estate), third party (medical bills, settlements, etc.), and shared-interest funds (funds held in dispute pending resolution, personal injury funds, etc.).
Attorney Trust Account three-way reconciliations must be performed monthly (at one point in time it was Quarterly). By performing the monthly, you will be able to catch if their was an over payment or other issue, which should enable you to resolve it quickly and avoid potential discipline. After all, if you are on top of your records and catching things, your limiting your risk. Also, its much easier to ask a client or third-party to return an over-payment if you catch it early.
To obtain your book balance you simply take your running checkbook balance (or check register). Your checkbook balance will have listed all transactions that took place in your Attorney Trust Account (at least it should). Nothing more should be required, as this is the true balance of what would be left in the account (outstanding items are already present in this piece (outstanding checks and deposits in transit).
All private practice Attorneys (full-time or part-time) are required to have an Attorney Trust Account (not associates if in a firm, but the firm itself). The signatories of the Attorney Trust Account are the responsible part for the account (only NJ Barred Attorneys may be signatories â New Jersey Practice specific). This does not mean you can have an employee of the firm perform the record-keeping (including the three-way reconciliation). However, the signatories will be responsible if their are any deficiencies in the account and could be liable for a disciplinary complaint for failure to supervise and negligent misappropriation if funds go missing, even if the Attorney did not have any involvement in the disappearance of funds. This is because an Attorney may not transfer their obligations to a lay person. If you have a busy practice or do not have time to perform all the record-keeping duties yourself its important for you to be aware of how the records are prepared and understand the process so you are educated and can catch issues.
Best practices encourage Three-Way Reconciliation no matter how many trust accounts are involved. In the Three-Way reconciliation, there are three items in the process: the trust ledger (internal books), the client ledgers, and the trust account bank statement.
Trust account reconciliation is the act of making our bank statement compatible with our trust accounting software or manual records. Reconciliation also gives you an overview of any clarity across your trust accounting records, help you match them with transactions on your bank statement.
As the name suggests, 3-way reconciliation balances three things: your internal books, your trust account bank statement, and the client ledger balances.
What makes this process more complicated is the fact that the balance on the trust account bank statement needs to be adjusted before the reconciliation begins. Sometimes, transactions occur at the end of the month and need some days to process. For instance, our client gave a check prior to the monthâs end but not yet deposited. The check would be recorded in the clientâs ledger but it would not yet have shown up in the trust account bank statement.
As mentioned above, lawyers must also run three-way reconciliation every thirty to sixty days, depending on where they practice.
Three-way reconciliation is a key part of client trust account bookkeeping. In particular, itâs the part that has a reputation for being so painstaking.
In particular, the retainers that go into client trust accounts help ensure a law firm gets paid in a timely fashion for the work they do . Anyone whoâs ever faced having client collections conversations understands the immense appeal retainers can hold.
Keeping everything separate helps the money be more easily accounted for.
If two or even all three balances donât agree with each other, then you need to track down the mistake. Before you get started on a great transaction hunt to find whatâs throwing your books off, check to see if all recent transactions have cleared. Sometimes, the issue is as simple as a deposit not having cleared the bank yet.
This provides some security for the lawyer because they have a guarantee that the client can pay their legal bills. However, because the lawyer hasnât actually done the work yet or billed the client, the money still legally belongs to the client. Therefore, the lawyer is holding it in trust for the client.
Therefore, state bars and the American Bar Association have developed regulations around how this money is handled to ensure that clientsâ trust in their lawyers isnât abused.
Thre Three-Way Reconciliation is your State Barâs way to quickly see if you are maintaining client ledgers and if any of the client ledgers have gone into the negative.
A Three-Way Reconciliation compares your bank balance to your trust ledger balance to the sum of your individual client ledger balances. This report gives you confidence that your internal records (trust ledger and client ledgers) reconcile back to your bank statement.
TrustBooks always keeps the client records and the firm trust records in sync. Itâs part of our secret sauce. this allows a Three-Way Reconciliation to automatically get generated when you do your month-end reconciliation process⌠no extra steps needed.
Not performing a Three-Way Reconciliation is the #1 way attorneys get out of compliance with state bar rules.