This interview is with Amy Coats, Bookkeeper / Accountant, Accounting Atelier.
What experiences led you to specialize in trust accounting and IOLTA compliance for law firms?
Honestly? Frustration – mine and theirs.
I’d spent 25+ years doing small business bookkeeping across various industries. Then I started working with law firms and saw the same pattern over and over: good attorneys, solid firms – but trust was being handled as an afterthought until someone felt nervous, a report didn’t tie out, or an invoice needed a transfer and nobody could confidently say what was available.
The moment that hooked me was seeing how trust issues actually happen in real life:
- Retainers come in and don’t get tied cleanly to the right matter.
- Payments get applied in the practice system but don’t match the bank deposit timing.
- Someone moves money from trust to operating, but the documentation trail is thin.
- And months later, the three-way reconciliation turns into a “what even happened here” situation.
That’s not just a bookkeeping skill gap – it’s a workflow gap.
So I went deep. I’m a QuickBooks Online ProAdvisor and certified in Clio and MyCase. I built the Legal Ledger Protocol™ to standardize how trust activity is recorded, reviewed, and reconciled – monthly – so firm owners aren’t guessing and aren’t scrambling when they need answers.
When you begin a new engagement, what’s your first diagnostic step for assessing a firm’s trust accounting health, and why?
My first diagnostic step is a three-way reconciliation for the most recent closed month—using the firm’s actual source reports, not “what they think is happening.”
Specifically, I pull:
- The trust bank statement + bank reconciliation
- The trust liability balance in QuickBooks
- The client/matter trust ledger report from Clio or MyCase
Then I compare them side-by-side.
Why? Because that one exercise tells me the truth fast:
- Is trust being reconciled monthly, or just “checked” occasionally?
- Do the bank, QuickBooks, and client ledgers actually tie?
- If they don’t tie, is it a small timing issue… or months/years of drift?
- Are there red flags like negative client balances, stale funds, or transfers that don’t have a clean trail?
After that, I do a quick trace test on a handful of real matters: retainer deposit → matter ledger → bank deposit → QuickBooks posting → any transfer to operating. That’s where you spot the pattern behind the mismatch (misapplied payments, batching timing, missing client-level detail, sloppy transfers, etc.).
This is basically the opening step of the Legal Ledger Protocol™: start with the reconciliation reality check, then diagnose the workflow that created it. If the three-way reconciliation is broken, everything downstream is guesswork.
Staying with reconciliation, could you walk us through your three-way reconciliation process so a small firm could model the cadence and checkpoints?
In the Legal Ledger Protocol™, the three-way reconciliation is a monthly routine.
Cadence: By day 10 of the month, the prior month’s trust activity is tied out and documented.
Step 1: Lock the date
Pick the month-end date (e.g., October 31) and run everything “as of” that date.
Step 2: Pull the three sources
- Trust bank statement → reconcile the trust bank account in QuickBooks
- QuickBooks trust liability → balance sheet line for trust/IOLTA liabilities “as of” month-end
- Client/matter trust ledger report from Clio or MyCase → total trust held “as of” month-end
Step 3: Compare in this order (this matters)
- A. Bank vs QuickBooks: Does the reconciled bank balance equal the QuickBooks trust liability?
- B. QuickBooks vs Client Ledgers: Does the QuickBooks trust liability equal the total of client/matter trust balances?
If A matches but B doesn’t, the issue is usually matter-level posting/application. If A doesn’t match, it’s usually bank/QuickBooks posting (missing deposit, wrong account, duplicate entry, timing/batching).
Step 4: Checkpoints I review every month
- No negative client/matter balances (this is a compliance flag)
- No mystery balances sitting in trust without a reason/plan
- Every trust-to-operating transfer ties to a specific invoice/cost with a clean paper trail
- Deposits trace cleanly: bank deposit ↔ QuickBooks entry ↔ Clio/MyCase matter ledger
Step 5: Fix loop (how we find the break fast)
When something doesn’t tie, I don’t “move on and circle back.” I do a quick trace on a handful of real items:
- one retainer deposit
- one batch deposit (LawPay is a common culprit)
- one trust-to-operating transfer
- one cost reimbursement
That usually exposes the pattern: misapplied payment, batch timing mismatch, transfer posted in one system but not the other, or activity recorded to the wrong matter/client.
Outcome: By the 10th, trust is reconciled, supported, and explainable—so if anyone asks questions, you’re not recreating history.
From what you see in the field, what IOLTA compliance mistake shows up most often in small or solo practices, and how do you fix it?
The most common IOLTA compliance mistake I see in small and solo firms is matter-level drift.
Trust money hits the bank, and it gets recorded somewhere, but it doesn’t get tied cleanly to the right client and matter in the system the firm relies on (Clio/MyCase). So, the total trust balance looks fine, but the detail underneath it is fuzzy.
What it looks like in real life:
- A retainer deposit hits the trust bank account and shows up in QuickBooks as a lump deposit.
- In Clio or MyCase, it’s unassigned, applied to the wrong matter, or sitting in a generic holding bucket.
Weeks or months later, someone asks, “What’s actually available for this client?” and the answer turns into a scavenger hunt.
It’s usually not malicious; it’s a workflow gap that stays invisible until the firm needs an exact, matter-level answer.
How I fix it:
- Clean the current state: match every trust balance to a client/matter with documentation and traceability. Sometimes that’s a full look-back through deposits, transfers, and matter ledgers.
- Install one rule going forward: no trust deposit is “done” until it exists in both places – the bank/QBO side and the client/matter ledger – tied to the correct matter.
- Add a light checkpoint: weekly spot checks until it becomes a habit, then it rolls into the monthly three-way reconciliation.
It’s not complicated. It just has to be consistent because, in trust accounting, “close enough” is where problems grow.
For very small firms with limited staff, how do you implement internal controls that still meet ethical and regulatory expectations?
Small firms can’t run the same control stack as a 20-attorney practice, but “we’re too small” doesn’t exempt you from ethics rules. You just pick the controls that do the most work with the least friction.
Here are the ones I implement first:
- Separate doing from review (even if it’s the owner).
You might not have enough staff for full segregation, but you can still separate posting from approval/review. For example, if someone records trust activity, the owner conducts a monthly 10-minute review of the three-way reconciliation and performs a quick spot-check of a few matters. Whoever can move money should not be the only person looking at the bank activity.
2) Documentation beats “I’ll remember.”
Small firms run on context in someone’s head—until that person is out, busy, or six months removed. Every trust movement needs a trail: what it was, which matter it concerns, why it happened, and what it ties to (invoice, cost, settlement, retainer, etc.). If you had to reconstruct the story later, it should be obvious without anyone “explaining it.”
3) A simple monthly checklist works best.
I’d rather see a one-page checklist done every month than a perfectly written policy that nobody follows. In my engagements, trust is tied out, transfers are documented, reports are reviewed, and the month is closed by a set date.
4) Reconcile to statements.
Bank feeds are helpful, but they’re not your control system. I reconcile to the actual PDF statement every month because feeds can lag, miss items, or disconnect—and you won’t notice until something is off.
The goal is to build enough structure so that if a client, CPA, or the bar asks a question, you’re answering from documentation—not scrambling from memory.
On the technology side, which tools and configurations have proven most dependable for matter-level trust accounting in your practice?
I keep the stack simple on purpose. The more tools you add, the more places trust activity can drift.
The core setup I trust:
- QuickBooks Online for the accounting file (operating + trust as separate bank accounts, with a clear trust liability structure)
- Clio or MyCase for the matter-level trust ledger (this is where the client/matter detail belongs)
- Monthly PDF bank statements pulled and saved – not just bank feeds
Why this works:
QuickBooks is built to track totals and produce financials. It’s not built to track trust at the matter level. Clio/MyCase tracks the matter-level ledger well—but it’s not your accounting system.
QBO handles accounting and reporting, Clio/MyCase handles matter-level trust detail, and the bank statement is the tie-breaker.
The integrations can save time, but they don’t eliminate the need for a monthly tie-out. Where firms get into trouble is assuming “it synced” means “it’s right.” The issues I see most are timing differences, batching, and duplicates that look fine until the month-end reconciliation.
Make sure:
- Trust and operating are never combined in QBO—separate bank accounts, always.
- In Clio/MyCase, every trust transaction is tied to a matter (no floating transactions, no mystery balances).
- Bank rules in QBO stay minimal and get reviewed often.
The tech should support the process, not replace it. The Legal Ledger Protocol™ is built around that: keep the stack clean, keep the workflow consistent, and reconcile monthly so nothing gets missed.
When something goes wrong and a trust account falls out of balance, what steps do you take to trace and resolve the variance?
First, don’t panic and don’t start “fixing” things before you know what broke. The fastest way to make a small variance turn into a bigger one is to throw adjusting entries at it.
The majority of variances come from timing, posting errors, batching, or activity that landed in one system but not the other.
Step 1: Identify where the break is.
I go straight to the three-way and answer one question:
- Bank vs QuickBooks? (missing/duplicate entry, wrong account, deposit timing, transfer posting)
- QuickBooks vs Clio/MyCase ledgers? (matter-level application/posting issue)
That tells me where to look first.
Step 2: Find the last month that tied.
If last month reconciled cleanly and this month doesn’t, the problem is in this month’s activity. If it’s been off for a while, I go back to the last clean three-way and work forward – month by month – until the variance appears.
Step 3: Trace transactions.
I start with the transactions most likely to create drift:
- a batch deposit (LawPay/processor deposits are common)
- a trust-to-operating transfer tied to an invoice
- a disbursement or reimbursement
- a retainer deposit tied to a matter
Within a handful of items, a pattern usually shows itself: a batch that wasn’t split properly, a transfer recorded in QBO but not at the matter level, a payment applied to the wrong matter, or activity posted to the wrong account.
Step 4: Fix it at the source, then re-run the three-way.
If it originated in Clio/MyCase, I correct it there. If it originated in QBO, I correct it there. Then I re-run the reconciliation until all three agree.
Step 5: Document the cause and the prevention.
I write down what the variance was, what caused it, and what changed to prevent a repeat. If the same pattern shows up again, it’s not a “mistake” – it’s a workflow gap.
To make compliance stick, how do you train attorneys and staff to build daily habits for intake, disbursements, and documentation that hold up under audit?
I don’t train people by dumping rules on them. I build a routine that survives a busy week—then we repeat it until it’s automatic.
1) Put it in the workflow
If the “right way” lives in a PDF nobody opens, it doesn’t exist. Intake and trust steps get built into the actual day-to-day flow in Clio/MyCase so the next action is obvious.
2) Explain the risk
I don’t say “because compliance.” I explain what happens when trust activity isn’t tied to the right matter and documented: it becomes a trust issue later—when it’s harder, slower, and riskier to unwind.
3) Practice on real activity
We use the firm’s actual transactions: “This retainer hit Tuesday—show me where it is in Clio/MyCase and where it is in QBO.” “This transfer moved to operating—what invoice/cost does it tie to, and where’s the backup?”
4) Set the check-in schedule
- Daily: trust deposits recorded and tied to the correct matter the same day
- Weekly: quick scan for unassigned trust items, odd balances, or missing backup
- Monthly: three-way reconciliation completed and reviewed by the owner
5) Make it explainable
My standard is simple: if someone can’t explain what they did and why—and point to the supporting record—we’re not done.