Client trust accounts · EscBooks Help

What a trust account is in EscBooks

A client trust account is a bank account that holds clients' money until it's earned: a lawyer's IOLTA, say, or a property manager's account for tenants' deposits. Any business can keep one: turn on Client trust accounts in Terms and features (the Legal preset turns it on), then mark one of your bank accounts as a Client trust account. From then on, EscBooks keeps a ledger for each client (or each project), and only clients' money can be recorded in it.

EscBooks records what your bank shows and what you did at the bank. It doesn't hold or move money: you write the check or make the transfer, and EscBooks keeps the record, matches it to your statement, and reconciles the month.

Client ledger: everything in and out for one client or project. It's a prepaid retainer held in the trust account.
Receipts and disbursements journal: every dollar in and out of the account, in date order, with the balance after each.
Three-way reconciliation: each month, your bank statement, this account in your books, and your clients' balances should all agree.

This guide uses EscBooks' own words. Your business may call projects something else (the Legal preset says Matters); change the words in Terms and features, and everything here works the same.

Mark your trust account

On Accounts, open the bank account that holds clients' money and click Edit. Adding a new bank account? Turn on Client trust account as you add it.
Under Client trust account, click Mark as Client Trust Account. The confirm says what changes.
Confirm, then Confirm it's you with your password (or, with two-step verification on, a code). Marking is recorded in Recent Activity on Security and emailed to the owners.

Only a bank account can be one. Cards, cash and other accounts can't.
An account that already holds anything that isn't clients' money (expenses, your own money, a starting balance) can't be marked: the dialog names what's in the way. Use a new bank account, or move those records first.
A trust account has no starting balance. Enter each client's opening balance as a deposit to their retainer, dated the day you start.
Marked by mistake? It can be unmarked only while nothing has been recorded in it. Once anything is, it stays a trust account.
It can't be deleted, so its records are kept. It can be closed once it's down to $0 and every month with anything in it is reconciled.

Add the trust account's payment details

A deposit request for a retainer held in trust shows your clients where to send the money. On the trust account's page, the Deposit Instructions card holds the trust account's own bank name, account name, account and routing numbers, and a note.

A trust deposit request shows only these: never your operating account's details, and never the Pay Now card link, on the invoice page, in the email or on the PDF.
With none set, the request shows no payment details at all, and its invoice page says Add the trust account's details so clients don't send this to operating.
Filling in a blank is free. Changing or clearing a detail already there asks you to confirm it's you, and every change is recorded and emailed to the owners, as your business's own payment details are.

A client pays a retainer

Each client's trust money is a prepaid retainer held in the trust account. In New Retainer on Retainers, Held in picks the trust account (with one, it's already picked). Choose a client, and a project for a retainer on one project only. See Retainers for the rest of the dialog.

Ask for the money with a deposit request, as with any retainer. When it's paid, record the payment on that invoice: it goes into the trust account, and only there.
Money that came without a request: Record Deposit on the retainer's page, or on the trust account's page. Say who it was Received from (the client, unless someone else paid), How (check, ACH, wire, cash or other), and a Reference such as the check number.
Or leave it to the statement: when the deposit shows on the trust account's statement, explain the line as a deposit and pick the retainer. It's recorded when you approve the statement.
A check that's part earned fee, part advance is deposited whole into trust. Then the earned part moves to operating, as below.

Bill and pay from the retainer

Bill your time as usual. A retainer held in trust never pays an invoice by itself when you send it: you pay from it on purpose, with Pay from Retainer on the invoice. That fee is then earned, and counts as income, but the money is still in the trust account until you move it to operating.

The trust account's page shows those fees as Earned Fees Not Yet Withdrawn, and since when. Leaving earned fees in trust mixes your money with your clients', so move them promptly.

Move earned fees to operating

On the trust account's page, click Record the Check in the earned fees notice, or Write a Trust Check and pick Earned fees to operating.
Pick the operating account it goes to, and tick the fees paid from trust that it moves. The amount is exactly their total.
Set the date and how it moved: Check, ACH, Wire or Other. A check takes the account's next number, filled in. An ACH or wire out of trust also needs who authorized it and the bank's confirmation.
Click Record, or Record and Print to print it on your check stock (as in Printing checks). The number is recorded once you say it printed right.
When the check clears, it matches its line on both the trust account's statement and operating's: paper checks match on their number up to 60 days later.

A check that won't be paid (lost, written wrong, stopped) can be voided until it clears. Its record goes, the fees it moved are free to move again, and its number stays used, so no other check takes it. The journal keeps both.

Refunds and costs paid for a client

Money paid out of a client's ledger is a trust check too. Click Write a Trust Check on the trust account's page or the retainer's page, and pick:

Refund to a client: unearned money going back to them.
Cost paid for a client: a filing fee, a client's wire fee or anything else paid on their behalf. It's not your business's expense.

Choose the client ledger, the amount, the Payee and the Purpose, and how it was paid (never cash). Neither can be more than the client has. Recorded something wrong? On the retainer's page, Remove Entry with the reason, then record it right. A trust ledger is never adjusted, and the journal keeps the entry, its removal and the reason.

Bank charges, your own funds and IOLTA interest

Lawyer's funds for bank charges: your own money, kept in the trust account only to cover the bank's charges.

Put some in with Add Your Funds (in the trust account page's ⋯ menu): a transfer from operating. Return Your Funds sends them back.
On the statement, explain the bank's fee as a Bank charge. It comes out of your funds; a charge beyond them is refused, so add your funds first.
Set a warning in the trust account's Edit: Warn when your funds are over an amount you choose. There's none until you set one.
IOLTA interest is the program's, not yours or a client's. Explain the bank's credit as IOLTA interest and the bank sending it on as IOLTA interest paid to the program. The two net to $0, and neither is ever income.

The trust account's statements

Bring statements in as for any account (see Importing statements). On a trust account's statement nothing becomes an expense, and every line must be explained before you can approve it. What is this? on each line offers only:

Money in: Deposit to a client's trust ledger, Your funds for bank charges, or IOLTA interest.
Money out: Earned fees to operating, Refund to a client, Cost paid for a client, Your funds for bank charges (going back), Bank charge, or IOLTA interest paid to the program.

Lines EscBooks can match on its own (a recorded deposit, a check by its number) come in explained. A line that looks like an ATM, cash or a card purchase is flagged Cash or card withdrawal from trust, and holds the approval until it's explained.

Reconcile the month

Approve the month's statement first. Then on the trust account's Reconciliations tab, open the month. Months are reconciled in order.
Bank: the statement's ending balance (filled in from the approved statement, or typed), plus deposits in transit, less outstanding checks.
Books: the trust account in EscBooks at the month's end.
Clients: every client ledger, plus your funds, plus Earned fees not yet withdrawn (shown on its own line), plus IOLTA interest due.
When All three agree, click Save and Lock and confirm. Off by an amount? Find what's missing, or explain the difference: a month with a difference saves only with an explanation.

Under the numbers, Outstanding Checks, Deposits in Transit and Client Ledgers list each item by date and check number, and each client's balance at the month's end.
Print gives a letter-size page with a signature line; CSV the summary, the client balances and the outstanding items. Both stay with the month.
Your accountant can prepare it with Save Draft (the bank balance and any explanation). Only an owner saves and locks it; Month-End shows a draft waiting.
A locked month can't change: nothing dated in it can be recorded, edited or removed, in the client ledgers, the transfers, the bank charges or its statement lines.
To correct one, Reopen Month on the latest locked month, with the reason, and confirm it's you. The old reconciliation is kept, marked as replaced, and the reopening is recorded and emailed to the owners. Save the month again once it's right.

Month-End lists each trust account too: whether the month is reconciled (or a draft is waiting), its statement lines still to explain, earned fees not yet withdrawn and since when, and your funds when they're over your warning. See Month-end.

Show a client their trust balance

The client's Statement, on the client's page, shows Funds held in trust for each of their retainers held in trust, as of today. Choose Statement with Trust Activity to add the last 90 days' deposits, amounts applied to invoices, refunds and costs: the full accounting, when they ask for it. Nothing about the trust account's bank details is shown.

Exports for your accountant or the bar

Export Trust Records, in the trust account page's ⋯ menu, downloads a zip: the journal, every client ledger and every reconciliation as CSV files, with the statement files you brought in. You and your accountant can export at any time, on any plan, even after a plan has ended.

Trust records are never deleted in the app: a correction is a removal with its reason, which the journal keeps. A request to delete your EscBooks account goes ahead once a full export has been made and you've acknowledged keeping the records yourself.

What EscBooks blocks, and why

Only clients' money can be recorded in a trust account, so these are refused there, with the reason:

Expenses (except the bank's own charges), equipment and subscriptions.
Owner distributions, money between you and the business, tax payments and other income.
A client's ordinary invoice payment. An earned fee is paid into operating; a client paying into trust is a deposit to their retainer, then paid from it.
Cash out of trust: money leaves by check or bank transfer.
Anything that would take a balance below zero: a client's ledger, your funds, the earned fees waiting, or the account itself.
Adjusting a trust ledger: remove the wrong entry with the reason, then record it right.

Your accountant can see everything and prepare a draft reconciliation, but can't record trust entries. Connected assistants can't record them either.