Law Firm Edition

A complete reference for attorney trust accounting in BizBooks Pro — from the conflict check that opens a matter through the retainer deposit, the trust drawdown that pays your invoice, and the three-way reconciliation your state bar expects every month. The compliance rules aren't suggestions here; the software enforces them.

Turning On the Edition

The Law Firm edition is included with the Pro tier and everything above it — no add-on fee. Once your license tier supports it, the ⚖️ Law Firm item appears in the sidebar automatically.

Not seeing it on a Starter plan? Go to Settings → License Management to upgrade the tier.

Setting Up the IOLTA Trust Account

An IOLTA (Interest on Lawyers' Trust Accounts) account is a bank account that holds money belonging to your clients — retainers, settlement proceeds, escrowed funds. It is never the firm's money, and your books need to say so structurally.

1. First, create the bank account itself in Chart of Accounts (type: Bank), matching the real IOLTA account at your bank.
2. Open ⚖️ Law Firm → Trust Account and click Set Up Trust Account.
3. Pick the bank account, enter your state bar's two-letter code (NY, CA, TX…), and optionally the last digits of the bank account number.
4. Click Flag as Trust Account.

BizBooks Pro automatically creates a companion liability account named "Funds Held in Trust" and links it to the bank account. From that moment, every dollar deposited to trust is offset by that liability — so your balance sheet always shows that the IOLTA balance belongs to clients, not the firm.

Conflict Checks

Every new matter starts with a conflict-of-interest search. When you click + New Matter, the first screen is a search box — not the matter form.

1. Type the prospective client's name, the opposing party, or opposing counsel.
2. BizBooks Pro searches your existing clients, each client's recorded related parties, all matter names, and the opposing parties and counsel on every past matter.
3. Review any hits, write a clearance note (e.g. "same surname, unrelated party — verified by phone"), and click either No conflict — clear & continue or Conflict found — record & stop.

Every search is stored permanently with the query, the hits, who ran it, when, and the clearance decision. When a bar auditor asks "show me your conflict-check procedure," this log is the answer.

You can also record related parties on any client (spouse, business entities, co-defendants) — open the client record and add them under conflict-related parties. Future searches will match against those names too.

Opening a Matter

A matter is a case or engagement — the unit everything else hangs off: time entries, invoices, trust activity, costs. After the conflict check clears, the matter form asks for:

• Client — picked from your Client Center.
• Matter name — e.g. "Smith v. Jones" or "Estate plan — Garcia."
• Matter # — leave it blank and BizBooks Pro assigns the next number in a per-year sequence (2026-0001, 2026-0002…). Type your own if your firm has an existing scheme.
• Billing method, opened date, statute-of-limitations date, opposing party/counsel — covered below.

Matter statuses run prospective → active → on hold → closed / settled / withdrawn, and every status change is logged with who made it and when. A matter holding any client trust money cannot be withdrawn — refund or transfer the balance first.

Billing Methods

Each matter declares how it bills, which drives validation and (in a later phase) settlement math:

• Hourly — time entries priced from timekeeper rates (next section).
• Flat fee — a fixed engagement amount, required at matter creation.
• Contingency — a percentage of recovery, required at creation.
• Hybrid — reduced hourly plus a contingency percentage.
• Pro bono — track the time, never bill it.

Timekeeper Billing Rates

Open ⚖️ Law Firm → Billing Rates. Each timekeeper (partner, associate, paralegal) gets an hourly rate with an effective-from date. When you raise rates next January, add a new row — the old rate closes automatically the day before, and historical time entries keep the rate that was in force when the work was done.

Rate resolution for a new time entry, in order: an explicit rate typed on the entry → the matter's hourly-rate override → the timekeeper's rate effective on the entry date.

The Client Trust Ledger

Inside the trust account, BizBooks Pro keeps a subledger per client: every deposit, drawdown, disbursement, and refund, with a running balance. This is the answer to the question your bar cares about most — "of the $84,000 sitting in your IOLTA account, whose money is it?"

The ledger is append-only. Entries can never be edited or deleted; mistakes are corrected by voiding (see Voiding an Entry), which leaves the original visible with a struck-through line and the void reason. That permanent visible trail is what makes the records audit-defensible.

To view any client's ledger, open Trust Account and click ledger on their row — or run the Trust Ledger by Client report for a full statement with opening and closing balances.

Client Level vs. Matter Level

Firms differ on how granular trust balances should be:

• Client level (the default) — one trust balance per client across all their matters. Leave the Matter field blank when depositing.
• Matter level — separate balances per case. Pick the matter on each deposit, and drawdowns check against that matter's balance specifically.

Both are bar-compliant; match whatever your engagement letters say. You can mix the two — some clients held at client level, others segregated per matter.

Recording a Retainer Deposit

When a client's retainer check or wire arrives:

1. Trust Account → 💰 Deposit.
2. Pick the client (and optionally the matter), enter the amount, date, source of funds, and a memo like "Retainer per engagement letter."
3. Click Record Deposit.

One action posts everything: the bank account goes up, the Funds Held in Trust liability goes up by the same amount, and the client's subledger gains a deposit entry. No journal entry to construct by hand.

Time Entry and Billing WIP

Track time against the matter from the matter detail page (+ Time) or your usual Time Tracking screen — entries linked to a matter automatically inherit the matter's client and pick up the right billing rate.

Unbilled time accumulates as WIP (work in progress). When it's time to bill:

1. Open the matter and click 🧾 Bill WIP (the button shows the unbilled total).
2. BizBooks Pro pulls every unbilled time entry — one invoice line each, with date, timekeeper, description, and hours — plus any unbilled costs tagged to the matter, into a draft invoice.
3. Review the draft in the regular invoice editor, adjust anything, then send it.

Line-per-entry detail matters in legal billing: when a client questions the invoice, every line traces back to a specific time record.

The WIP by Matter report (Reports tab) shows unbilled value across all matters with aging buckets — 0–30, 31–60, 61–90, and 90+ days — so old unbilled work can't hide.

Paying an Invoice from Trust

Once you've earned fees against a retainer, move the money in a single guarded action:

1. Trust Account → 📤 Pay Invoice from Trust.
2. Pick the client, then one of their unpaid invoices — the picker only offers that client's invoices, which is how the no-commingling rule is physically enforced.
3. The amount pre-fills with the lesser of the invoice balance and the client's available trust funds.
4. Choose the operating account to receive the money and how the client notice goes out.
5. Click Transfer & Apply Payment.

BizBooks Pro then does four things atomically: releases the trust liability, moves cash from IOLTA to operating, applies a payment to the invoice, and writes the subledger drawdown. If the amount would push the client's trust balance below zero, the whole thing is rejected — even when the IOLTA account itself has plenty of other clients' money in it. That's the rule that keeps Client A's funds from ever covering Client B's bill.

Client Notices

Several state bars — New York, California, and Texas among them — require the client be notified whenever their trust money moves to the firm's operating account. BizBooks Pro generates this notice automatically as part of every trust-to-operating transfer.

The notice PDF states the client, matter, date, amount withdrawn, and which invoice it paid. You'll be offered it immediately after the transfer; you can also reopen it any time from the client's trust ledger (notice link on the transfer row). Record how it was delivered — email, mail, portal, or in person — when you make the transfer.

Disbursements and Refunds

Disbursement to a third party

Paying a court clerk, expert witness, or settlement payee directly out of a client's trust funds: Trust Account → 🧾 Disburse. Pick the client and matter, the payee, amount, and check number. The same non-negative rule applies — the disbursement can't exceed what that client actually holds. Disbursements require a manager or admin role.

Refunding the balance

Closing a matter with money left in trust? ↩️ Refund returns the remaining balance to the client and zeroes their subledger — the usual last step before marking the matter closed.

Costs Advanced: Hard vs. Soft

Law firms front two kinds of client costs, and they bill differently:

• Hard costs — money paid to outside parties: filing fees, expert witnesses, court reporters, deposition transcripts. These pass through to the client at cost.
• Soft costs — in-house expenses like photocopies, postage, and long-distance charges. Firms commonly mark these up; BizBooks Pro applies your firm's default markup (set under ⚖️ Law Firm → Billing Rates → Firm Settings) unless a specific cost carries its own.

The workflow: enter the bill in Vendor Hub exactly as you would any vendor bill, then open the matter and click 💵 Tag Cost. Pick the bill, choose hard or soft, and it appears in the matter's Costs Advanced table with its effective billable amount. The next Bill WIP run pulls unbilled costs onto the draft invoice alongside the time — soft costs marked up, hard costs at face value — and each cost line names the vendor and bill number.

Contingency Settlements

When a contingency or hybrid matter resolves, open the matter and click 🤝 Settlement. The worksheet walks the standard waterfall:

1. Gross recovery — what the case settled for.
2. Case costs reimbursed — defaults to the matter's unbilled hard costs; the firm gets these back off the top.
3. Firm fee — the matter's contingency percentage applied to the remainder (editable, since real settlements get negotiated).
4. Client net — what's left, computed live as you type.

Recording the recovery doesn't move money — it creates the agreed split and the settlement statement PDF (gross, deductions, net, signature lines) for the client to approve. The actual money flow is two steps, both guarded:

1. Deposit the settlement check into trust for that client/matter (a normal 💰 Deposit).
2. Click distribute on the recovery. One atomic journal moves the fee to Legal Fees income and the cost reimbursement against Client Costs Advanced, transfers the firm's share to operating, and pays the client their net from trust — all subject to the same non-negative-balance rule as every trust outflow. Distributing before the deposit, or twice, is rejected.

Reimbursed hard costs are automatically marked non-billable afterward, so the client can never be charged for a cost the settlement already paid back.

Voiding an Entry

Made a mistake? Click void on the entry in the client's ledger. You must supply a reason — it's stored permanently next to the original entry. The void posts a reversing journal entry to the general ledger, and if the entry was a trust drawdown, the invoice payment it applied is unwound too.

One guard to know about: you cannot void a deposit whose funds have already been drawn against. Void or refund the later activity first, then the deposit — the ledger always unwinds in reverse order.

Three-Way Reconciliation

The cornerstone of bar-compliant trust accounting. Three numbers must agree:

1. The adjusted bank statement balance — statement balance, plus deposits in transit, minus outstanding checks.
2. The book balance — the IOLTA account in your general ledger as of the same date.
3. The sum of every client's trust ledger.

Open ⚖️ Law Firm → Three-Way Rec, pick the date, and type the figures off your bank statement. BizBooks Pro computes sides two and three itself and renders the verdict live — BALANCED or OUT OF BALANCE — before you save. The balanced/variance result is computed by the server, never self-reported, so the saved record means something.

If the rec doesn't balance, you must write a variance explanation to save it at all — silent imbalances are exactly what bar audits catch. Each run is stored permanently with who ran it and when, and a partner can add a recorded sign-off.

Statute-of-Limitations Watchlist

Give each litigation matter its SOL date when you open it (you can add it later via the matter's edit form). Matters within 90 days of their deadline get a red ⏰ flag on the matter list, and the SOL Watchlist report (Reports tab) lists everything due within 30, 60, or 90 days with the responsible attorney — a one-glance malpractice guard for partner meetings.

Multi-State Firms

A firm with offices in New York and California typically maintains a separate IOLTA account per state, each governed by its own bar rules. BizBooks Pro supports this directly: flag each bank account as its own trust account with its own state code. Balances, ledgers, and reconciliations stay fully separate, and the account picker on the Trust tab switches between them.