Cash Flow Reports – Part 10: Client Trust Balances

At long last we come to the end of our top 10 Cash Flow Reports Tips with our final entry, Client Trust Balances.

Institute a procedure to ensure regular review of the trust account balance for each clients.  You want to determine whether there are funds in trust that can be applied against unbilled time or disbursements and whether there are clients or matters that are approaching the exhaustion of their retainers or cost deposits.  Keeping on top of this information will go a long way toward making sure that you are not placed in a position of having  to work for free because a client cannot pay you but you’ve waited too long to ethically withdraw from the case.  If you find that there are such cases, contact these clients immediately to let them know that they need to bring in additional funds, and tickle yourself to make sure that they follow through.

A well run firm will have a solid system in place to maintain control over all client trust account activity.  This is an area that should receive special attention and focus. Not only must the firm and its lawyers abide by stringent fiduciary and ethical obligations to be able to fully account for all client funds held in trust at all times.  In addition, careful management of retainers and cost deposits can provide substantial working capital savings to the firm.