THE PROFITABLE LAW FIRM Your Law Firm’s Most Overlooked Risk: Trust Account Blind Spots

Most attorneys feel confident in their legal skills. Far fewer feel confident in their trust account.

And in today’s enforcement environment, that gap is becoming dangerous.

Not because attorneys are acting in bad faith, but because blind spots in trust accounting develop quietly. You don’t see them until it’s too late.

The truth is simple: Your trust account isn’t just a bank account. It’s a compliance system. And systems fail when no one is watching the right things.

Where Blind Spots Start

Trust account mistakes rarely come from one big error. They come from small oversights that compound over time.

Here are the most common places firms drift into trouble:

• Client ledgers that don’t match the bank balance

• Earned fees removed before they’re fully earned

• Uncleared checks or stale deposits

• Client costs recorded incorrectly as trust activity

• Disbursements made without verifying available funds

• No three-way reconciliation or irregular reviews

• Using operating accounting habits inside the trust account

Individually, these feel small. Together, they create audit findings, disciplinary action, and severe reputational risk.

The 4 Trust Account Blind Spots You Must Eliminate

1. Incomplete or inconsistent client ledgers

If your client ledger doesn’t tell the same story as your bank balance, regulators will see it immediately. This is the first place auditors look, and the first place many firms fall short.

Fix: Centralize ledger entries, require documentation for every transaction, and confirm client balances before every disbursement.

2. No monthly three-way reconciliation

Without monthly reconciliation, problems hide beneath the surface. A missing deposit, duplicate entry, or timing error can sit for months - or years.

Fix: Run a full three-way reconciliation every month:

• Bank balance

• Book balance

• Total of individual client balances

All three must match perfectly.

3. Earned fees taken too early

This is one of the most common audit findings nationwide. When pressure builds or billing falls behind, firms sometimes withdraw fees “in anticipation.” But trust accounting is not built on anticipation - it’s built on documentation.

Fix: Only transfer funds after the work is billed, documented, and truly earned.

4. Client costs posted incorrectly

Many firms mix reimbursable client costs, advanced fees, and trust transactions. This creates confusion and inaccurate balances.

Fix: Use clear workflows for:

• Advanced client costs

• Reimbursable costs

• Hard vs. soft costs

• Settlements and disbursements

Each has its own compliance rules.

What This Means for Your Firm

Blind spots don’t show up overnight. They show up slowly, and then all at once.

But the good news is: Once you build simple, consistent trust workflows, compliance becomes predictable instead of stressful.

A clean trust account protects your license, your reputation, and your peace of mind. It also gives your firm something most owners never talk about out loud: confidence.

Confidence that your systems work. Confidence that your records are defensible. Confidence that nothing is hiding beneath the surface.

Want the Workflow That Makes This Easier?

I created a free IOLTA Compliance Kit with checklists, workflows, and practical guidance to help firms eliminate blind spots for good.

You can download it anytime — it’s designed to make trust accounting something you can feel confident about.