Trust accounting for Ontario paralegals: a software checklist

Trust accounting is the part of practice management where software quality is least negotiable. Client money held in trust is not yours, the record-keeping expectations are specific, and the consequences of getting it wrong are not the sort you fix with a patch release.

This is a checklist for evaluating how a system handles it, written from the perspective of what actually causes trouble rather than what looks good in a feature list.

Separation has to be structural

Trust and general funds are two different things, and the separation between them should exist in the data model rather than as a category you select. In practice that means separate ledgers, separate bank accounts, separate deposit flows and separate journals, all the way through.

A useful test: ask whether it is possible to accidentally record a general receipt against the trust account by picking the wrong option from a dropdown. If the answer is yes, the separation is cosmetic.

The two views you need constantly

There are two trust reports a paralegal office reaches for repeatedly, and they need to agree with each other:

The listing is the one that matters at reconciliation time, because the sum of individual client balances has to equal what the bank says you are holding. If those two numbers disagree, you need to find out why, and you need the ledger to do it.

Monthly reconciliation as a process

Reconciliation is a monthly obligation and it should feel like a defined process rather than an exercise in spreadsheet archaeology. What to look for:

• A reconciliation screen that works against the bank statement for a defined period
• Outstanding items carried forward clearly, so uncleared cheques are visible
• A comparison of the client trust listing total against the reconciled balance
• A retained record of each completed reconciliation, not just the latest one
• The ability to produce the reconciliation as a document you can file

That fourth point is easy to overlook and important. Being able to show last March’s reconciliation, as it was completed at the time, is the entire purpose of keeping them.

Receipts, disbursements and refunds

Money moves into and out of trust in a small number of well-defined ways, and each should produce a record and, where the client expects one, a document:

1. 1Trust receipts, by cash, cheque or card, recorded against the client and matter
2. 2Transfers from trust to general when you invoice against money you hold
3. 3Trust disbursements, paid out on the client’s behalf
4. 4Trust refunds, returning money you no longer need to hold

Each of these should generate a receipt on your letterhead without anyone typing the amounts a second time. Receipts that are produced separately from the ledger entry are a reliable source of discrepancies.

The audit trail

Every trust movement should be attributable: who recorded it, when, and what changed if it was later amended. This is the capability you do not think about until the day you need it, at which point nothing else substitutes for it.

Ask whether amendments are recorded as amendments with the prior value retained, or whether editing a transaction simply overwrites it. The difference matters.

Why keeping it in one system matters

Some firms run trust accounting in separate accounting software. It works, but it creates a permanent reconciliation problem of its own: the matter lives in one system and the money lives in another, and keeping the two aligned becomes somebody’s recurring job.

When trust sits alongside the file, a client’s balance is visible where you are already working, invoices draw on money you are already holding, and the receipt you hand the client carries the matter reference without anyone copying it across.

A checklist to take into a demo

• Are trust and general genuinely separate, structurally?
• Can you show one client’s full trust ledger on demand?
• Does the client trust listing total to the account balance?
• Is monthly reconciliation a defined process with retained history?
• Can you produce a completed reconciliation as a filed document?
• Do receipts generate from the ledger entry, on your letterhead?
• Are batch disbursements supported?
• Is every movement attributable, with amendments recorded rather than overwritten?
• Does the migration from your current system include trust history?

That last one connects back to the decision you are probably actually making. Trust history is the part of a migration most likely to be quietly descoped, and the part you can least afford to lose.