IOLTA bookkeeping mistakes often appear first as a record that cannot answer a simple question: whose funds are these, what changed, and why do the supporting balances disagree? The safest response is to preserve the reports, identify the source of the difference, and route the issue through the firm’s lawyer-controlled review process.
The examples below are recordkeeping and control problems, not conclusions about a lawyer’s compliance. State rules differ. Arizona firms should compare their process with the State Bar of Arizona’s current trust-account guidance, forms, and manual.
1. Treating the bank balance as a client balance
The bank shows total cash, not ownership by client. A disbursement decision requires the relevant client or matter ledger and the lawyer’s authorization. Maintain a separate ledger for every owner of funds and never infer an individual balance from the pooled account total.
2. Preparing only a bank reconciliation
A bank reconciliation does not establish that the trust register agrees with the total of all individual ledgers. A three-way reconciliation compares the adjusted bank, the trust-register balance, and the combined client and applicable administrative ledgers as of the same date. Use the monthly three-way reconciliation checklist to preserve each component.
3. Using mismatched cutoff dates
A statement ending on June 30 cannot be meaningfully compared with a trust register through July 3 and a client-ledger report generated before late June activity was posted. Freeze one cutoff date and retain the reports used for that close.
4. Carrying unexplained outstanding items
Old checks, deposits in transit, returned items, and transfers should have a documented owner and next action. An item does not remain valid merely because it makes the reconciliation balance. Review aging each month and escalate stale items for attorney direction.
5. Allowing negative client or matter ledgers
A negative ledger is a warning that recorded disbursements exceed the funds attributed to that client or matter. Stop and trace the transactions. Possible causes include a wrong matter assignment, a duplicate entry, a missing deposit, or a disbursement recorded before sufficient collected funds were available.
6. Letting integrations post without review
A practice-management platform, payment processor, bank feed, and QuickBooks file may all describe the same transaction. If more than one system creates the accounting entry, deposits and transfers can be duplicated. Document which system is authoritative, who reviews integrations, and how clearing accounts return to zero.
7. Correcting differences without an audit trail
A plug entry, deleted transaction, or overwritten prior report can hide the symptom without resolving the cause. Preserve the original records, document the research, and use authorized dated corrections. If the difference cannot be resolved, the lawyer should determine the next step with the appropriate jurisdictional resource.
A monthly prevention checklist
- Use one statement date for every report.
- Post only supported, authorized activity.
- Reconcile the bank and list genuine outstanding items.
- Review the trust register for gaps, duplicates, and unusual descriptions.
- Total every client, matter, and applicable administrative ledger.
- Investigate negative balances and unresolved differences.
- Preserve the packet and document attorney review.
When to bring in bookkeeping help
Outside help may be useful when reconciliations have been skipped, software was converted, client ledgers do not total, or nobody can reproduce a prior close. An IOLTA bookkeeper can reconstruct records and prepare an exception list. A three-way reconciliation service can then establish the recurring comparison. Neither service replaces the lawyer’s judgment or responsibility.
Frequently asked questions
Should a reconciliation difference be posted to an expense?
Not merely to make the report balance. Trace the difference to source records, preserve the evidence, and use an authorized correction only when the underlying cause is understood.
Can software prevent every IOLTA mistake?
No. Software can enforce parts of a workflow, but access control, source review, client-level records, reconciliation, and attorney oversight remain necessary.
What should a firm preserve each month?
Preserve the bank statement, bank reconciliation, trust register, client-ledger schedule, supporting documents, exception notes, corrections, and evidence of the firm’s required review.