Simple setup. Clean trust accounting. Confident compliance.

The Right Way to Track Your IOLTA Funds (Without Losing Your Mind)

Wondering how to properly keep track of your Interest on Lawyer Trust Accounts (IOLTA)? for many small firms, trust accounting is one of the most confusing parts of bookkeeping. The good news? With the right structure, tracking client funds becomes a whole lot easier (and far less panic‑inducing).

Start With a Solid Chart of Accounts

The secret to painless trust accounting is organization. If you don’t have many retainers (less than 20 at a time) the best way to keep client funds straight is to build out your Chart of Accounts using subaccounts — one for each client. Think of it as giving everyone their own labeled cubby instead of tossing everything into one big box. Have more than 20 retainers – you need a different process. Find it here:

Set It Up the Right Way

1. Create an Other Current Liabilities parent account called Funds Held in Trust.
2. Add your new client as a Customer.
3. Create a Trust subaccount for that client:
   • Chart of Accounts → New
   • Type: Other Current Liabilities
   • Detail: Trust Account Liabilities
   • Sub‑Account of: Funds Held in Trust

Follow the Money (Accurately)

• 1. Deposit the Retainer

  • Make a Deposit → Choose IOLTA
  • Received From: client
  • Account: client’s Trust subaccount

  

2. Invoice for Work Performed

Create your invoice as usual.

3. Pay the Invoice Using Trust Funds

• Write a check
• Payee: client
• Bank: Trust
• Category: client’s Trust subaccount
•   

  4. Receive Payment on the Invoice

  Apply the payment to close out the invoice properly.

  Important: Manually transfer funds from Trust to Checking outside of QuickBooks — the software won’t handle that part for you.

  Need Trust Accounting That Actually Makes Sense?

  IOLTA bookkeeping can get complicated faster than you can say “retainer agreement.” Don’t risk errors, audits, or sleepless nights.
  Contact BudgetEase today — we’re the rare accounting team that treats trust accounting like a fun puzzle instead of a horror movie. Let us help you get (and stay) compliant with confidence.

   

  Link to Other IOLTA Blogs:

  https://www.budgetease.biz/blog/attorneys-are-you-accounting-for-your-interest-on-lawyers-trust-acc…

  https://www.budgetease.biz/blog/manage-trust-funds-using-quickbooks