Every month, attorneys have complex accounting to do, and this task can get away from you if you don’t keep up with it or if you don’t have a professional accountant on-staff. An attorney’s monthly accounting includes billing for clients, payroll (weekly or bi-weekly or bi-monthly), and managing their Interest on Lawyers Trust Account (IOLTA), among other transactions. All of this ties into an attorney’s profit and loss statements. A successful law firm knows how much it owes in office payables, client payables from the IOLTA, and the receivables.
What Is an IOLTA?
An IOLTA is the account in which an attorney holds client funds. These funds could be in the form of unused retainers, settlements or trial awards. The attorney must keep these funds separate from their operating funds. As an attorney uses up a retainer, he or she can transfer the money from the IOLTA account to his or her operating account.
The IOLTA pays interest, but the attorney does not have access to that interest. Instead, the interest from all attorneys’ IOLTAs is pooled and used to support improvements to the justice system and to provide civil legal aid to those who cannot otherwise afford a civil attorney. Every state, plus Washington, D.C. and the Virgin Islands, have an IOLTA program. Since 2009, IOLTAs made over $124.7 million throughout the nation for low-income civil clients and improving the justice system.
Monthly Office Operations
In addition to the regular monthly office expenses, attorneys must separate the interest and client funds in their IOLTA accounts. The interest, depending on the amount, goes to the IOLTA program or to the client. Other transactions in an IOLTA account include deposits of retainers, settlements and trial awards, payments from settlements or trial awards, refunds to clients, and the transfer of used retainers to the attorney’s operating account.
In addition to paying the attorney for his or her time, client money sometimes pays medical expenses and other expenses, or, instead of receiving the settlement, the client pays the settlement. ABusinessManager.com keeps track of all of these transactions so that the attorney knows how much profit he made each month.
Additionally, when you use monthly accounting services, you now what your monthly gross income, net income and expenses are. You can also tell how much you spend on any expense, such as payroll, and how much you profited on each case.
Instead of trusting an office manager to manage the IOLTA account and/or the firm’s operating account, ABusinessManager.com provides professional business accounting services to attorneys and other types of businesses.
The service we offer is professional, accurate and affordable – and it gives an attorney peace of mind knowing that his or her accounts are managed and that the correct amounts in the IOLTA are transferred to the appropriate parties. Firms receive complete and accurate monthly bookkeeping, accounting and financial statements each month, so the partners can monitor the firm’s financial performance.
We work with all major accounting software systems, including Xero, QuickBooks, Sage, Wave and more. We also adjust and monitor your accounting software to ensure that it shows your firm’s performance.
Contact ABusinessManager.com today to discuss the services we offer, including virtual CFO services, payroll preparation services, bookkeeping and business accounting services, and payroll tax compliance services.