Managing trust accounts means you should understand three-way bank reconciliations. Regardless of whether your state calls it an "IOLTA account" or an "IOLA account," attorneys are responsible for trust/escrow/IOLTA funds. Most bar associations require that the IOLTA account be reconciled three ways. Even if your process is as simple as clicking a button and reviewing the report, it is important to understand the three-way reconciliation.
Three-way reconciliation is just checking that these three numbers are all the same.
The trust ledger (internal books)
The client ledgers
The trust account bank statement.
Simple, right? However, three-way bank reconciliations can turn your hair gray if you don't understand it. But don't worry, you got us.
After working with lots of law firms to help them with doing bookkeeping/accounting, we summarize 9 essential things that you should know about three-way reconciliation. With a visual guide, you can easier understand this term. Let's figure it out with the Irvine Bookkeeping law accounting infographic below.
A monthly three-way reconciliation report will make it easier to catch any issues because you'll have a small range to check. Keep an eye on it so you won't have to worry.
However, lawyers don't do accounting. It's difficult to wrestle with numbers. There are lots of problems in case the balances don’t match. Will you spend your time to figure out? You can but you might lose lots of money from your clients while doing that by yourself. Let's think of seeking professional help from an outsourced bookkeeping service for law firms. They can help you to found out where to look depends on which accounts are different.
If you need assistance in three-way reconciliation for your law firm, Irvine Bookkeeping could be a suitable choice for your law firm. Find out more by contacting us today! Call Irvine Bookkeeping now for a Free Quote!
Irvine Bookkeeping offers a full range of law firm bookkeeping services and promises that in 2-3 weeks, we clean up a whole book for you to prepare for tax seasons. We believe knowing your company's financial health is the key to maintaining control of your business.
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