The three balances
| Adjusted bank balance | The ending balance on the bank statement, plus deposits recorded but not yet on the statement, minus checks and transfers issued but not yet cleared. |
| Trust journal (book) balance | The running balance in the firm's trust account journal or register, with every deposit and disbursement recorded through the same date. |
| Sum of client ledgers | The total of the current balance on each client or matter ledger. No individual ledger should be negative. |
Step by step
- Pick the dateUse the bank statement's ending date so all three balances are measured at the same moment.
- Adjust the bank balanceStart from the statement's ending balance. Add deposits in transit. Subtract outstanding checks and pending transfers. List each item so a reviewer can trace it.
- Bring the journal currentMake sure every deposit and disbursement through the statement date is in the journal, including wires, bank fees and interest remitted under the IOLTA program.
- Run a client trial balanceList every client ledger with its balance on that date and total them. Investigate any negative balance before going further.
- Compare and find differencesThe usual causes are a deposit posted to the wrong client, a check recorded at the wrong amount, a bank fee taken from trust and never recorded, a returned deposit, or a cleared check never entered.
- Document and signKeep the reconciliation, the list of adjusting items and the client trial balance together, signed and dated by the person who did it and the lawyer who reviewed it.
How often it is required
The ABA's model recordkeeping rule asks for monthly trial balances and quarterly reconciliations, with both intervals bracketed for each state to set, and its comment calls monthly reconciliation the preferred practice. Many states require monthly. California, for example, requires a written monthly reconciliation of the client ledgers, the account journal and the bank statement for every client trust account.
Look up your state's rule before you set a schedule. Our state guides summarize the reconciliation and reporting rules for all 50 states and DC.
How long to keep it
The ABA model rule keeps trust account records, reconciliations included, for five years after the representation ends, and several states require longer. In several jurisdictions the reconciliation itself is a required record, so being able to rebuild it later from bank data is not enough.
Where software fits
Reconciling monthly finds a problem up to a month after it happened. suss. runs the three-way reconciliation every day against the bank feed and the client ledgers, flags the first item that breaks it, and keeps the signed record for each close, so the monthly reconciliation your state requires is already done when the statement arrives.
Common questions
What is the difference between a two-way and a three-way reconciliation?
A two-way reconciliation compares the bank statement with the firm's trust journal. A three-way reconciliation adds the total of all client ledgers, which is the only way to show that each client's money, not just the account total, is accounted for.
How often do lawyers have to reconcile trust accounts?
It depends on the state. The ABA model rule sets quarterly as the minimum with monthly preferred, and many states, including California, require a monthly reconciliation in writing.
What should I do if the three balances do not match?
Do not sign the reconciliation. Find the item causing the difference, usually a posting to the wrong client, an unrecorded bank fee or a returned deposit, correct the records, and document the correction with the reconciliation.
See these checks run on your own trust account.
suss. reconciles bank, book and every client ledger daily, flags the exceptions in this guide, and keeps the record your bar asks for.
Schedule a demoSources and rules cited (4)
General information, not legal or tax advice. Rules vary by state and change; confirm the current rule for your jurisdiction.