A trust reconciliation that will not balance is stressful because it is the one report a regulator will certainly ask for. The good news is that the difference always has a cause, and there is a reliable order in which to look for it.
What has to agree
A trust reconciliation is a three-way comparison. As of the same date, these three figures must be equal:
- The adjusted bank balance: the bank statement balance, less outstanding cheques, plus deposits not yet credited.
- The trust bank journal balance: what PCLaw says is in the trust bank account.
- The client trust listing total: the sum of what PCLaw says you hold for each matter.
Work out which pair disagrees. That tells you where to look.
If the bank and the trust journal disagree
This is an ordinary reconciliation difference, and it is nearly always one of these:
- A transaction on the statement that was never entered: bank charges, interest, a wire fee, a returned cheque, a deposit made directly at the bank.
- A wrong amount. If the difference divides evenly by 9, two digits have probably been swapped, for example 1,540 entered as 1,450.
- A wrong date, placing an entry in the neighbouring month.
- An entry made twice, or a cheque that was voided in PCLaw after it had been cashed.
- An item ticked as cleared that has not cleared, or the opposite.
- A wrong opening balance, because last month's reconciliation was changed after it was finished.
A quick method: look for a single transaction equal to the difference, then one equal to half the difference. Half means an entry was recorded on the wrong side, a receipt entered as a payment or the reverse.
If the trust journal and the client listing disagree
This should not be possible in normal use, because PCLaw posts both sides of a trust entry at once. When it happens, check:
- Both reports are for the same date and include the same trust accounts. A firm with two trust bank accounts must compare like with like.
- Whether closed or inactive matters are included in the listing. A balance sitting on a closed matter is easy to leave out.
- Entries dated in a closed period, or entries changed after the month was reconciled.
If the dates and settings are right and the two still differ, the cause is very likely a transaction that was only partly saved. See the section on data problems below.
Find the date it went wrong
This is the fastest way to shrink the search. Run the trust journal and the client trust listing as of each earlier month-end until you find the last month in which they agreed. The problem lies in the month after that. Then narrow it by week, then by day.
Signs it is a data problem, not an entry mistake
- The trust journal and client listing differ and no single transaction explains it.
- A client's trust ledger shows a balance that its own listed transactions do not add up to.
- A reconciliation you completed and printed last month now shows different figures.
- The difference appeared after a crash, a power cut or a failed upgrade.
In these cases, run Verify Data Integrity with everyone out of PCLaw, after taking a backup, and keep the report.
What not to do
- Do not post an adjusting entry to make it balance. It conceals the real error, it will be found in an audit or spot check, and it leaves a client's ledger wrong.
- Do not delete and re-enter transactions in months that have already been reconciled.
- Do not reset or recalculate balances before recording what the figures were. Once changed, the evidence of where the difference came from is gone.
- Do not leave it for next month. Two months of differences are much more than twice the work.
Negative matter balances
While you are in the client listing, look for any matter with a negative trust balance. A negative balance means one client's money has been used for another, and regulators treat it as serious even when the overall total agrees. The usual causes are a payment posted to the wrong matter, a cheque written before the deposit was recorded, or a deposit that was later returned by the bank.
Deadlines
Most regulators require trust accounts to be reconciled monthly and within a set time. In Ontario the monthly trust comparison must be completed by the 25th of the following month. Check the rule that applies to you, and keep the signed reconciliation with its supporting reports.
When to ask for help
Call when the difference will not come out after an afternoon of looking, when the journal and listing disagree with no explanation, or when earlier months have changed. We find trust differences regularly, including those caused by damaged data, and we document what was wrong and how it was corrected so that you have a clear record.
This is part of our PCLaw support service. Where the cause is data damage, our PCLaw data recovery team repairs it at database level. Contact us and we will take a look.