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Trust Account Three-Way Reconciliation

Three-way reconciliation trust account work, done each month: the bank, the trust journal and the client ledgers drawn as three columns that must meet at one number.

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The problem

The month waits on the one deposit nobody posted to a client

Each month the trust accountant ticks the statement against the check register, sums the client ledgers and looks for the gap. The totals are the easy part. What holds the month open is almost never in them: a wire recorded with no client, a deposit slip keyed to the wrong matter, a ledger left idle for years.

Finding the cause means opening scanned statements, deposit slips, check images and wire confirmations one at a time, then emailing attorneys to ask whose money it is. A reconciliation can also agree at the total and still hide a client below zero, where another client’s money paid that client’s bill.

Built forTrust accountantsControllersTrust account partnersFirm administrators

The Problem Today

Each month the bank, the trust journal and the client ledgers must agree; when they don’t, the cause hides in a slip.

≈10%
of ethics violations one state bar cited involved trust rules published
≈4%
of grievances to that bar were trust account overdrafts published

Opened every month

  • Statements
  • Journal
  • Ledgers
  • Slips
  • A week on one depositOne unposted wire stalls the whole month
  • Totals that tie, and hideA client below zero passes a check of totals only

The Solution

  1. Bank lines matchedEach line tied to the journal; slips and wires read to split deposits
  2. Three balances, one numberAdjusted bank, trust journal and the client ledgers must meet
  3. Each gap explainedThe cause read from the slip, check or wire, with the entry to fix it
  4. The partner signs the monthA controller approves each entry; the trust partner signs the pack

Built-in controls

  • Agents never post an entry; a person approves
  • Preparer, approver and signer are three people
  • Client records are not used to train models

What You Get

Firms hand the bar a month that explains itself: each gap, overdraft and idle balance with its source.

2 hours
of trust accountant time a month, down from about 12 our estimate
  • Overdrawn ledgers tracedEach one followed back to the slip that caused it
  • Idle money handled earlyA next step for each balance past the firm’s limit
  • A pack ready for the barIn the state’s report layout, with each figure cited
From statement to signature

The three-way reconciliation trust account month, one feature to a screen

From the statement read to the pack signed, the monthly close moves off the trust accountant’s desk a part at a time.

  1. 01Three-way tie-out

    Three balances drawn as columns that must meet at one number

    How it works

    • The bank column is built from the statement, less checks not yet cleared, plus deposits in transit
    • The trust journal and the sum of 1,284 client ledgers stand beside it
    • A gap between columns is a labeled line that stays open until a document explains it
    • Here the ledgers sit $12,500.00 short of a journal at $4,618,902.37

    Trust accountantSees where the month stands and which single line keeps it from closing, without rebuilding the tie-out in a spreadsheet.

  2. 02Statement, read and matched

    Bank lines matched to the journal, bundled deposits split by their slips

    How it works

    • The statement is read from the PDF and checked against the bank feed
    • Of 403 bank lines, 396 match exactly and 7 by reading a slip, check image or wire
    • A deposit of $18,450.00 splits across two matters from its deposit slip
    • Checks issued but not yet cleared sit in their own list beside the page

    Trust accountantStops ticking hundreds of statement lines one by one and opening each slip to learn which matters a deposit belongs to.

  3. 03Trust journal

    A trust journal that rolls forward and isolates receipts with no client

    How it works

    • Opening balance, receipts and disbursements shown as one line to the cent
    • $4,391,277.85 plus $2,964,118.62 less $2,736,494.10 closes at $4,618,902.37
    • Filters for lines not yet on the statement, fees to operating and lines with no client
    • One incoming wire, matched at the bank, sits as an unassigned receipt

    Trust accountantFinds the receipt nobody posted to a client with one filter, where today it hides among the month’s journal lines.

  4. 04The difference, explained

    Unassigned wires explained from the reference on their confirmation

    How it works

    • Finds the wire on the statement page and reads its wire confirmation
    • The reference names the estate and its file: a refund of a holdback from a house sale
    • Each claim cites its source, the wire confirmation and the settlement statement
    • Proposes the entry: $12,500.00 from unassigned receipts to the estate’s ledger

    Trust accountantGets back the week one unposted wire used to take, spent chasing attorneys to learn whose money it is.

  5. 05Three columns meet

    Approvals that post an entry only after the attorney confirms the client

    How it works

    • The responsible attorney confirms which client the deposit belongs to
    • The entry then waits for the controller, who cannot approve one they proposed
    • On approval the ledger column rises by $12,500.00 and the line closes
    • All three columns meet at $4,618,902.37, with nothing left open between them

    ControllerApproves each correction against the slip or wire behind it, so no entry rests on a hunch or on the person who proposed it.

  6. 06Client ledgers

    Every client ledger drawn as a square, any below zero in red

    How it works

    • 1,284 squares run largest balance first: 1,191 above zero, 92 at zero, 1 below
    • Idle balances and earned fees left in trust carry their own colors
    • Search finds a client or matter and opens its ledger card
    • The overdrawn card shows −$3,200.00 and the two lines that caused it

    Trust accountantCatches the client whose ledger went below zero, which a check of totals alone passes, before a bar auditor does.

  7. 07Overdraft, traced

    Overdrawn ledgers traced to the slip or check that caused them

    How it works

    • Here the deposit slip names matter 0418
    • Sets it beside the journal, where the digits were transposed to 0481
    • Proposes a reclass of $3,200.00 between the client’s two matters; the total does not change
    • Shows the rule, the source passage and who decides on one screen

    ControllerSees the cause and the fix side by side with the slip itself, so a reclass is approved on evidence and noted in the pack.

  8. 08Idle balances

    Idle balances plotted by age, each with a drafted next step

    How it works

    • Each balance idle past the firm’s 24-month limit is a bubble sized by its amount
    • A second line marks the state’s remittance deadline at 36 months
    • Drafts a step for all 17: 9 refunds, 5 due-diligence letters, 3 due diligence then remittance
    • Each letter or refund goes to its responsible attorney to approve

    Responsible attorneyLearns which money on their matters has sat untouched for years, and acts before the unclaimed-property deadline instead of after it.

  9. 09Signed pack

    A monthly pack in the bar’s layout, locked until every check is met

    How it works

    • Reconciliation, outstanding items, ledger listing, differences and sign-off, in that order
    • The trust account partner signs only once each check beside the pack is met
    • Preparer, approver and signer are three different people
    • The three-way difference reads $0.00, and the pack is kept for 7 years

    Trust account partnerSigns a month that would explain itself to a bar auditor, two days after the statement arrived.

Bank and journal agreed to the cent, and four items still needed an answer

What the month held beneath its totals, each answered in writing before signing.

A wire recorded with no client

The journal held $12,500.00 as an unassigned receipt. Its confirmation named the estate and the file, and the settlement statement showed the holdback it refunded.

A transposed matter number

A slip for matter 0418 was keyed to 0481, the same client’s family trust. A check then cleared against 0418 and left it at −$3,200.00 while the totals still tied.

Three balances near the deadline

Of 17 balances idle past 24 months, totaling $41,286.55, three pass 36 months within 90 days and need due diligence before any remittance.

Earned fees still sitting in trust

$4,875.00 across 3 matters, invoiced with notice more than 30 days ago and not disputed. Leaving it there mixes the firm’s money with the clients’.

Around the tie-out

More of the month: checks, holdbacks, fees and the audit trail

Checks still in flight, the holdback behind a wire, fees left in trust and the record of who did what.

A check that has not clearedEach outstanding check opens its image from the firm’s register: payee, amount, matter and memo, issued but not presented by month end.
The settlement line behind the wireThe settlement statement from the estate’s house sale shows the $12,500.00 held back for a final water and sewer bill, the money the wire returned.
The estate’s ledger, postedThe estate’s ledger now carries the wire and closes at $198,740.00, each line cited to its slip, statement page or wire confirmation.
Fees earned and still in trustThree invoices sent with notice and not disputed. The proposed fix moves $4,875.00 to the operating account once the billing partner and the controller agree.
Who read, matched, approved and signedAgent steps and human decisions in one time-stamped trail, kept with the pack. Nothing in it can be edited or deleted.
A year of signing daysPrepared by hand, months were signed 7 to 11 days after the statement. Since agents began preparing them: day 3, then day 2, twice.

Read from 61 deposit slips, 214 check images and 47 wire confirmations

Every record behind the month, read by agents and cited line by line.

Bank statementsScanned PDF or the bank feed, each line cited to its page
The trust journalThe firm’s check register, with the matter and the balance after each line
Client ledgersEach client and matter ledger, summed on the statement date
Deposit slipsRead to split a bundled deposit across its matters
Check imagesRead for the payee when the statement line alone is not enough
Wire confirmationsRead for the originator and the reference line that names the client
Settlement statementsRead to explain a holdback and the refund that followed

Agents draft the entries and letters, and three different people decide

Where the agents stop and a named role takes over.

Posting an entryAgents propose. The controller approves, and never an entry they proposed themselves.
Naming the clientThe responsible attorney on the matter confirms whose money a deposit is.
Signing the monthOnly the trust account partner signs, and never a month they prepared.
Writing to a clientLetters and refunds are drafted; the responsible attorney approves each before it goes out.
Guessing a smudged amountWhen a figure cannot be read, the agents ask rather than fill it in.

Three-way reconciliation trust account checks before the partner signs

What is three-way reconciliation trust account software?

Three-way reconciliation trust account software proves each month that the adjusted bank balance, the trust journal and the sum of the client ledgers agree. This solution reads the statement and the slips, checks and wires behind it, matches each bank line, explains each difference from its source document and builds the pack the trust account partner signs.

What happens when a client trust ledger goes negative?

It shows in red on the ledger grid and opens as a breach, even when the totals tie. The agents trace the lines that caused it back to their slips and checks and propose the fix. The controller approves it from the source passage.

How often should a trust account be reconciled?

As often as the firm’s rule requires. The settings hold the rule, the cadence and the day by which each month must be signed, and the agents prepare the month as soon as the statement arrives.

What does it do with balances that sit idle for years?

Balances idle past the firm’s limit go on an age line beside the state’s deadline for unclaimed money. Each gets a drafted next step, a refund, a due-diligence letter, or due diligence then remittance, and the responsible attorney approves it before it goes out.

Who can approve an entry or sign the month?

The trust accountant prepares and proposes. Entries are approved by the controller, who cannot approve their own. Only the trust account partner signs the month, and never one they prepared. Agents post nothing.

Does it read scanned statements or a bank feed?

Both. The statement is read from the PDF, scanned or digital, and checked against the bank feed when there is one. Deposit slips, check images and wire confirmations are read the same way, and each value is cited to its page.

How are client and bank details kept safe?

Bank account numbers appear as their final four digits on screen and in the pack. Each read, match and decision is logged in an audit trail that cannot be edited.

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Trace each gap
to the slip that made it.

Pick a month your firm has already signed: see its three columns drawn, its gaps traced and its pack laid out on your own records.

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