How to balance your (law firm’s) checkbook

I have never taken an accounting class or bookkeeping class and I never balanced a checkbook until I started my own law practice. But as an attorney with my own practice, and in the midst of tax season, I became a quick learner, especially because I didn’t have the luxury of being able to afford outside help.

When I first started living on my own, I never had a reason to balance my checkbook because I honestly rarely used it. I charged almost all of my purchases to a credit card and at the end of each month, I would write one check to pay off the card. By using the credit card, I was able to keep track of all of my expenses in one place and not have to worry about accidentally overdrawing on my bank account.

I checked regularly my bank account online and was able to keep track of my expenditures. My rule of thumb was to make sure I had enough in the bank each month to cover my bills. As long as there was more money in the bank than what I owed each month, I was content and didn’t see a need for balancing a checkbook.

When I started my own law practice, I was not only responsible for my own money but for the firm’s. Of particular importance is the trust account because, as an attorney, I am responsible for other people’s money and keeping ledgers of all transactions in and out.

Whenever I meet with clients, I always explain to them that the money they are paying me as a retainer belongs to them and is placed in a trust account until the money is earned. The money is not earned until I have provided them an invoice showing them the work that I have done and the amount to be transferred. I always make sure to educate my clients on the trust account not only for their sake but also as a reminder to me that the money deposited in the trust account does not belong to me, but the client.

Now that I am responsible for money that is now my own, I quickly learned how to balance a checkbook. Below are five tips that I use to help me balance the books.

5.  I enter all client transactions into my law firm management software Clio, which easily provides the ledger I need for my trust and operating accounts.

4.  I use QuickBooks for my bookkeeping needs. I sync all the transactions from Clio into QuickBooks.

3.  I sync credit cards and bank statements into QuickBooks.

2.  I use LawPay for my credit card processing which allows money paid by clients to be deposited into the trust account and credit card processing fees to be withdrawn from the operating account. LawPay syncs with my law firm management software Clio.

1.  I match all my statements with my entries in QuickBooks to make sure all of the information is syncing correctly. If I set aside one day each month to do my bookkeeping, it saves me a lot of time during tax season.

After I complete my bookkeeping, I happily turn over the books to my accountant.

If you have any tips on how on balancing the books that you would like to share, please leave them in the comments section below.