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Level 15

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You usually don't have one bank account per client. You have a Trust Bank. Everything that goes in and out of Trust Bank is only related to Liability for that client name. That is how you can audit that Trust Bank = Liability balance by names.

 

Like this:

 

You get a settlement check or a retainer, so you set up a Service item for Settlement and one for Retainers. They link to one Client Liability account. You use that charge item on a Sales Receipt for the client name when you get the funds and deposit to Trust Bank.

 

Now you are ready to Charge them for fees, advanced costs, etc, and that is an Invoice for the client.

 

You use Check from Trust bank and you enter the details for the clients having trust banking Outflow, using the same Liability item that put the funds into Liability and Trust. That payee is your Operations Account. The Amount(s) are what they owe you. That means one Trust Bank Check is all you need, for the monthly charges, with split details and Tracked for that name:

Retainer $500 Jones

Retainer $1,000 Smith

Settlement $5,000 Johnson

= $6,500 going from Trust bank to Operating account to reflect the firm has been Paid. You process each Split as a Receive Payment.

 

To pay out the Client share, you list them as payee check on the Trust check, you enter the same Charge item to show it is paying out that liability. Example

Payee = Johnson

Check detail is the Settlement item for the rest of their funds and track it as Johnson.

 

You set up and save some custom reports, one for the Liability account as All Activities and one titled on and filtered for Cleared Status = No and titled Current Balances. Total by Name. Manage the Liability account, when you see a name is 0 balance, by reconciling always and only to an ending balance of 0, to mark as cleared that client's activities. This is why there are two versions of your report. This is how you avoid over- or under-crediting the client their funds.

 

You manage the Trust Bank using the bank statements. But you should always be able to show trust bank = liability by name.

 

I have not figure out how to add more than just one attachment, so I included only the example where someone used a Credit Memo in error, throwing that client's balance for liability out of balance.

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