The Problem

The Trust Banking Account is subject to uncontrolled deposits by Third Parties.  This simply means that persons who do not appreciate the integrity of the lawyers trust banking account may make deposits directly to that account beyond the scope of our control.

Before the advent of internet banking, trust cash was received at the reception counter, and an accounts clerk or bookkeeper’s assistant receipted the money to various ledger accounts and made up a bank deposit.  We had total control of all funds deposited.

Internet banking has changed all of this.

Once our banking details have been published, there is no control over the amounts deposited into, or references used (or lack thereof) on our accounts.

This leads to a sharp rise in deposits into the trust banking account where the owner of the money so deposited cannot be identified.

 

Unallocated trust funds may in fact be the payment of an outstanding bill. Leaving it as an unknown trust deposit creates both an unnecessary administrative burden on the trust, and it means that payment cannot be matched to an outstanding bill.

 

A management solution

In order to provide for a simple management regime governing unknown trust deposits, it is suggested to use separate accounts for each year.

Name the account “2019 Unknown Trust Deposits“. With the purpose that all unknown trust deposits for the given year will be reflected against this account. Subsequently the age of these individual transactions and the reconciled balance may be easily verified.  Start a new account for each new year.

 

Aggressive management of the trust banking account is essential.

• Bank to Cash Book reconciliation should be conducted dynamically and not once a quarter. Weekly of at least monthly reconciliation provides the shortest window periods between actual transactions and the processing/reconciliation process.
• Unknown Deposits are typically classified as unknown because we simply lack sufficient information to accurately identify the client and allocate the transaction accurately. Additional tools such as Invoice Trackers, Age Analyses and direct client contact should make identification of the deposits easier.

 

By aggressively managing trust deposits by using short time cycles and management tools, the number and value of unknown trust deposits may be sharply reduced, reducing the administrative burden and releasing cash into the system.

-Dynamic