1. Choosing an Accounting System
It is the trust account supervisor’s responsibility to ensure that a proper and effective record-keeping system is in place. This includes maintaining up-to-date trust records and preparing the required reconciliations on a monthly basis.
The first decision you will need to make is whether you wish to use a manual or electronic accounting system. Many members who still use a manual system seem to feel that they should be using computers instead. They shouldn’t feel that way.
Each system has its advantages and disadvantages.
A manual system is well suited to a member who doesn’t have a significant volume of trust transactions. It is also inexpensive and may be easily adapted to meet the member’s needs, while still complying with the rules. Simple basic journals and ledgers may be purchased at any office supply store, or some practitioners even use the audit department’s templates. A new practitioner may wish to hire an accountant/bookkeeper to help set up the required bookkeeping system. It is also useful to talk to other members with similar practices to see what system has worked well for them. You may also contact an auditor of the Law Society of Manitoba for direction.
Those finding the manual system time consuming may wish to switch to an electronic (computerized) system.
An electronic system can provide a wide range of timely information which is not quickly obtained when using a manual system. Other benefits include ease of recording transactions, eliminating certain types of errors, and various controls which are built into some of the systems. However, the system is more expensive to acquire and maintain.
An additional option would be a ‘semi’ electronic system where a spreadsheet program such as Excel is used. While the fluent user of the program can set up various spreadsheets for the records and usually eliminate addition errors, it lacks some of the controls built into specially designed accounting software.
However, additional steps at the time of conversion are required if you are converting from one software to another. In particular, you must preserve the full history for the current matters that have balances in trust from the prior system by either:
- importing historical data into the new software. This is more than just the balances at the time of conversion, it is all of the underlying transactions that led up to the balance when converting. For example, if a matter being converted had $775 in trust at the time of conversion and had historical transactions of a $1,000 retainer receipt and a $225 payment for filing a statement of claim, the two historical transactions of the receipt and the payment must be imported into the new system, not just the $775 balance; or
- entering only the current balance in the new software for each matter and printing a copy of each client trust ledger with a current balance. This can be either a paper copy or electronic copy saved in a universally readable format. Following the above example, this would document the $1,000 retainer and the $225 payment, which would be used together with the data in the new software for later transactions to form a complete history for the matter.
It is also a good idea to maintain one license of your prior software for a period of time to allow for ease of looking back for earlier records if anything was missed at the time of conversion.