Law Firm Trust Account Reconciliation
Complete guide to IOLTA compliance, three-way reconciliation, and automating your law firm's trust accounting workflow. Ensure state bar compliance and protect client funds.
Law firm trust account reconciliation is the monthly process of verifying that client funds held in IOLTA accounts are accurately tracked and properly safeguarded. Most state bars require three-way reconciliation: matching your bank statement to your trust account ledger and to individual client ledgers.
Proper trust account reconciliation is not optional—it's a mandatory ethical requirement enforced by state bar associations. Failure to reconcile trust accounts monthly can result in disciplinary action, suspension, or disbarment. Banks are required to report trust account overdrafts to your state bar, triggering automatic investigations.
Quick Takeaways:
- Three-way reconciliation is required monthly in most jurisdictions
- Zera Books converts bank statement PDFs to structured data in 60 seconds
- Track client-by-client balances for complete IOLTA compliance
- Maintain reconciliation documentation for 5-7 years for audits
- Automated workflow reduces reconciliation time from hours to minutes
With Zera Books, law firms convert trust account bank statement PDFs to structured Excel/CSV format with 99.6% accuracy. Our AI categorization automatically identifies deposits, withdrawals, fees, and interest, making three-way reconciliation straightforward and audit-ready. Multi-account support handles firms with trust accounts in multiple jurisdictions.
Understanding IOLTA Requirements
What is IOLTA?
Interest on Lawyers' Trust Accounts (IOLTA) are pooled trust accounts where attorneys deposit client funds that are too small or held too briefly to earn interest for the client. The interest funds legal aid programs. IOLTA participation is mandatory in all 50 states.
Compliance is Mandatory
State bars require monthly reconciliation, detailed record-keeping, and annual reporting. Banks must report overdrafts and insufficient funds directly to bar associations. Non-compliance can result in suspension or disbarment.
Record-Keeping Standards
Law firms must maintain individual client ledgers, trust account ledgers, bank statements, check copies, deposit slips, and monthly reconciliation reports for 5-7 years. All records must be available for bar audits.
Three-Way Reconciliation
The minimum standard requires matching (1) bank statement balance, (2) trust account ledger balance, and (3) sum of all client ledger balances. All three must reconcile monthly to demonstrate proper safeguarding of client funds.
The Three-Way Reconciliation Process
Follow this step-by-step process to ensure complete IOLTA compliance and accurate client fund tracking.
Convert Bank Statements to Structured Data
Upload your IOLTA bank statement PDF to Zera Books. Our Zera OCR technology extracts all transaction details with 99.6% accuracy, handling any bank format. Convert statements in 60 seconds instead of manual data entry.
Reconcile Bank Statement to Trust Account Ledger
Compare the bank statement balance and transactions with your trust account ledger. Verify all deposits, withdrawals, bank fees, and interest match between both records. Identify and resolve any discrepancies.
Reconcile to Individual Client Ledgers
Verify that each client's trust ledger accurately reflects their transactions. Ensure all client deposits, disbursements, and balances are properly documented. Track client funds separately even for small amounts or short periods.
Verify Three-Way Balance
Confirm that the sum of all client ledger balances equals your reconciled bank statement balance. This three-way match proves that client funds are properly tracked at both aggregate and individual levels.
Document and Report
Create a reconciliation report showing all three balances match. Include the reconciliation date, any adjustments made, and supporting documentation. Maintain these records for state bar audits and compliance verification.
Why Law Firms Choose Zera Books for Trust Accounting
Zera Books streamlines trust account reconciliation while maintaining strict IOLTA compliance standards.
99.6% Extraction Accuracy
Zera OCR is trained specifically on bank statement formats. Extract every transaction detail accurately—dates, descriptions, amounts, check numbers, and balances. No manual data entry errors.
Client-by-Client Tracking
Track individual client balances and transactions with complete accuracy. Generate client ledgers that meet state bar requirements. Verify the three-way reconciliation in minutes instead of hours.
Multi-Account Support
Handle multiple IOLTA accounts for firms practicing in different jurisdictions. Process multiple trust account statements simultaneously while maintaining separate client ledgers for each account.
Audit-Ready Documentation
Maintain complete transaction records in structured Excel/CSV format. Generate reconciliation reports with supporting documentation. Keep 5-7 years of records organized for state bar audits.
AI Transaction Categorization
Automatically identify deposits, withdrawals, bank fees, interest, and check payments. Categorize transactions for quick reconciliation and reporting. Reduce manual review time.
Secure Processing
Bank-level security for sensitive client trust account data. Documents are processed and deleted—not stored. Maintain attorney-client confidentiality and ethical obligations.
Frequently Asked Questions
Trusted by Accounting Professionals
"My clients send me all kinds of messy PDFs from different banks. This tool handles them all and saves me probably 10 hours a week."
Ashish Josan
Manager, CPA at Manning Elliott
Ready to Streamline Your Trust Account Reconciliation?
Join law firms and legal professionals who trust Zera Books for IOLTA compliance and trust accounting. Reduce reconciliation time from hours to minutes.
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