How Often Should a Law Firm Reconcile Its Trust Accounts?

Law firms should generally reconcile every trust account at least once each month. For Florida attorneys, monthly trust account reconciliation is not merely a bookkeeping recommendation; it is part of the minimum trust accounting procedures required under the Rules Regulating The Florida Bar.

A proper reconciliation should confirm that the balance shown by the bank agrees with the firm’s trust account records and the combined balances of all individual client ledgers. This process is often called a three-way reconciliation.

Although the formal reconciliation is typically performed monthly, law firms should monitor trust account activity much more frequently. Deposits, withdrawals, earned-fee transfers, settlement payments, client balances, and unexpected bank activity should be reviewed as transactions occur.

What Is a Trust Account Reconciliation?

A trust account reconciliation is the process of comparing the law firm’s internal accounting records with the activity reported by the bank.

A complete three-way reconciliation compares:

1. The adjusted trust account bank balance
2. The balance shown in the trust account journal or ledger
3. The total balance of all individual client and third-party ledgers

All three totals should match.

The adjusted bank balance begins with the ending balance on the bank statement and accounts for transactions that have been recorded by the firm but have not yet cleared the bank. These might include outstanding checks, deposits in transit, bank fees, returned payments, or electronic transfers.

The ABA describes three-way reconciliation as a process that ensures the combined client ledger balances agree with both the trust ledger and the trust bank account activity.

How Often Are Florida Law Firms Required to Reconcile Trust Accounts?

Florida law firms must perform monthly trust account reconciliation procedures.

The Florida Bar explains that lawyers using trust accounts must maintain specific records and perform monthly procedures. These include reconciling trust account balances and comparing the reconciled bank balance with the total amount shown on the individual client ledgers.

Recent Florida Bar guidance reiterates that Rule 5-1.2 requires attorneys to reconcile every trust account monthly against client ledger records and to identify, explain, and resolve discrepancies immediately.

Law firms outside Florida should review the rules in their own jurisdictions. Trust accounting requirements vary by state, although monthly three-way reconciliation is widely treated as a fundamental law firm accounting practice.

When During the Month Should Reconciliation Be Completed?

The reconciliation should be completed as soon as reasonably practical after the monthly bank statement becomes available.

A dependable schedule might look like this:

• The bank statement closes on the final day of the month.
• The bookkeeper collects the statement and supporting records during the first few business days of the following month.
• The reconciliation is prepared and discrepancies are investigated.
• The responsible attorney reviews and approves the completed reports.

Law firms should avoid allowing reconciliations to accumulate. Waiting several months can make it much harder to identify the source of an error because staff may need to review numerous deposits, checks, transfers, invoices, and client matters.

A monthly closing date also creates a consistent cutoff for financial reporting and trust account review.

Is Looking at the Bank Balance Enough?

No. Checking the balance through online banking is not a complete reconciliation.

The bank only reports the total amount in the account. It does not show whether the firm has assigned the correct amount to each client or third party.

For example, a law firm’s bank balance and trust journal might both show $80,000. However, the combined client ledgers might total only $78,500. That $1,500 discrepancy could indicate:

• A deposit assigned to the wrong matter
• A missing client ledger entry
• An incorrect earned-fee transfer
• A duplicate withdrawal
• An unrecorded bank charge
• A payment made for the wrong client

A proper reconciliation is not complete until all three components have been compared and any differences have been resolved.

Should Trust Accounts Be Reviewed More Often Than Monthly?

The full three-way reconciliation is usually performed monthly, but law firms should not wait until the end of the month to review trust activity.

Certain information should be reviewed daily or whenever transactions occur.

Deposits

Every deposit should be assigned to the correct client, matter, or third party when it is received. Supporting information should identify the source, amount, date, and purpose of the funds.

Disbursements

Before issuing a check or electronic payment, the firm should confirm that the client has enough cleared funds available. The overall bank balance should never be used as evidence that a particular client has money available.

Earned-fee transfers

Before transferring money from trust to the operating account, the firm should verify that the fees have been earned and that the transfer is supported by billing records or other appropriate documentation.

Negative client balances

Individual client ledgers should be monitored for negative balances. A negative balance may mean the firm has used funds belonging to another client to cover a payment or transfer.

Unusual bank activity

Online banking alerts can help the firm identify unfamiliar withdrawals, returned deposits, unauthorized electronic transactions, or unexpected fees before the monthly reconciliation.

Monthly reconciliation remains essential, but more frequent transaction-level oversight can prevent an error from affecting several clients before it is discovered.

What Should Be Reviewed During the Monthly Reconciliation?

A monthly trust account reconciliation should include more than confirming a final total.

The person completing the reconciliation should review the following areas carefully.

Bank statement activity

Every deposit, check, withdrawal, transfer, and bank fee should be compared with the firm’s records.

Outstanding checks

Checks that have been issued but have not cleared should be listed. Older checks should be investigated rather than carried forward indefinitely.

Deposits in transit

Deposits recorded near the end of the month may not appear on the bank statement until the following month. These should be documented and confirmed after they clear.

Trust account journal

The journal should contain a chronological record of all receipts, disbursements, transfers, and adjustments affecting the account.

Individual client ledgers

The balances of all client and third-party ledgers should be added together and compared with the reconciled bank and trust journal balances.

Negative or unusual balances

The reconciliation should identify negative balances, inactive matters that still hold money, unidentified funds, and unusually old balances.

Supporting documentation

The person performing the reconciliation should confirm that deposits, transfers, payments, and corrections are supported by appropriate records.

Florida Bar guidance identifies monthly reconciliations, receipts and disbursement journals, and individual client ledger cards as core attorney-created trust accounting records.

What Happens When the Balances Do Not Match?

A discrepancy should be investigated immediately. It should not be ignored, rounded away, or carried into the next month without an explanation.

The investigation may involve:

• Comparing the bank statement with the trust journal
• Reviewing outstanding checks
• Confirming deposits in transit
• Searching for duplicate transactions
• Reviewing client ledger postings
• Checking earned-fee transfers
• Looking for bank service charges
• Verifying electronic payments
• Confirming that corrections were posted to the correct matter

Once the source is found, the correction should be documented clearly. The records should show what happened, which account or client was affected, who authorized the correction, and when it was made.

The goal is not simply to force the totals to match. The firm should understand and document why they did not match.

Who Should Perform the Reconciliation?

The reconciliation may be prepared by:

• An attorney
• An internal bookkeeper
• A law firm administrator
• An outside bookkeeping professional
• An accounting firm familiar with legal trust accounts

However, attorneys remain responsible for the protection of client funds even when the bookkeeping work has been delegated.

The ABA has warned that firms should confirm that their accountant or bookkeeper has a defined process for completing three-way reconciliations. It also notes that outsourcing the accounting work does not transfer the law firm’s responsibility for trust account errors.

The person performing the reconciliation should understand client ledgers, legal billing, trust transfers, settlement disbursements, outstanding transactions, and the rules governing client funds.

Should Someone Else Review the Reconciliation?

Yes. A completed reconciliation should be reviewed by the attorney or attorneys responsible for the trust account.

The review should verify that:

• All three balances match
• Every discrepancy has been resolved
• No client ledger has a negative balance
• Outstanding checks have been reviewed
• Deposits and withdrawals are properly documented
• Earned-fee transfers are supported
• Unidentified funds have been investigated
• The completed reports have been retained

In firms with multiple attorneys, responsibilities for signing checks, recording transactions, reconciling accounts, and reviewing reports should be clearly assigned.

Florida firms with more than one attorney are required to maintain a written trust account plan for each trust account and distribute it to the lawyers in the firm. The plan must identify the lawyers responsible for trust account duties, including monthly and annual reconciliation responsibilities.

What Records Should Be Saved With Each Reconciliation?

A complete monthly reconciliation file may include:

• The monthly bank statement
• Check images or canceled checks
• Deposit records
• Wire and electronic transfer confirmations
• A list of outstanding checks
• A list of deposits in transit
• The trust receipts and disbursements journal
• Individual client ledger reports
• The three-way reconciliation report
• Documentation explaining discrepancies
• Records supporting earned-fee transfers
• Evidence of attorney review or approval

Florida trust accounting records generally must be retained for at least six years after the conclusion of the representation.

Digital accounting systems can make these records easier to organize, but firms should still confirm that the system preserves complete and accessible transaction histories.

Why Monthly Reconciliation Matters

Monthly reconciliation gives a law firm an opportunity to verify that every dollar in the trust account is present, properly recorded, and associated with the correct client or third party.

It can help uncover:

• Bookkeeping mistakes
• Misapplied client deposits
• Premature fee transfers
• Duplicate payments
• Negative client balances
• Unauthorized withdrawals
• Bank errors
• Stale checks
• Missing supporting records

Even a small discrepancy can reveal a larger weakness in the firm’s accounting process. In 2025, The Florida Bar highlighted a case in which an attorney’s investigation of a 47-cent discrepancy led to the discovery of suspicious trust account activity.

Consistent reconciliation helps law firms address these issues while the transactions are still recent and easier to investigate.

Get Help With Monthly Trust Account Reconciliation

A law firm should reconcile each trust account every month and review individual transactions throughout the month. The monthly process should compare the adjusted bank balance, the trust account journal, and the total of all client ledgers.

A&W Associates provides law firm bookkeeping, IOLTA account management, and three-way reconciliation services for attorneys in Wesley Chapel, Tampa, and throughout the Tampa Bay area. We can help your firm maintain organized records, monitor client balances, and complete timely monthly reconciliations.

Contact A&W Associates to learn more about professional trust accounting and bookkeeping support for your law firm.

This article is provided for general informational purposes and does not constitute legal advice. Attorneys should review the trust accounting rules applicable to their jurisdiction and consult appropriate legal or ethics counsel when necessary.