Monthly bookkeeping checklist for a small law firm

A small law firm's monthly bookkeeping has one thing a normal business does not: the trust account. This checklist runs through the whole month-end close, trust first, then operating accounts, billing, payables, payroll, and the financial review, with a timeline for closing the books by the 15th. Work the trust section first, because it is the part that carries bar-compliance risk and the item an auditor checks first.

1. Trust and IOLTA accounting

Do this first, and keep it separate from ordinary bookkeeping.

• Obtain the month-end trust or IOLTA bank statement.

• Reconcile the trust bank account for the statement period, noting outstanding checks and deposits in transit.

• Generate the individual client and matter ledger report.

• Confirm every client ledger has an accurate running balance and no client balance is negative.

• Perform the three-way reconciliation: the adjusted trust bank balance, the trust ledger balance, and the sum of all client ledgers must agree to the cent.

• Investigate and resolve every discrepancy before closing the reconciliation. Do not force an adjustment.

• Verify every trust disbursement has authorization and supporting documentation.

• Transfer earned fees from trust to operating only when properly earned and billed.

• Refund or document any unearned retainer on a closed matter.

• Save the reconciliation report, bank statement, and client ledger report to the compliance file.

2. Operating accounts and general ledger

• Reconcile every operating bank account and credit card to the general ledger.

• Investigate outstanding checks, deposits in transit, and any unexplained transactions.

• Review bank fees and merchant processing fees, and confirm they were charged to operating, not trust.

• Categorize every operating expense, such as software, bar dues, insurance, and rent.

• Separate advanced client costs, the hard costs like filing fees and court reporters, from firm overhead.

3. Client billing and accounts receivable

• Enter or verify all billable time and expenses for the month.

• Review unbilled time and unbilled client costs.

• Generate and send outstanding client invoices.

• Post client payments and match them to invoices.

• Review the accounts receivable aging at 30, 60, and 90 days and follow up on overdue balances.

• Record revenue by fee type where useful, such as hourly, flat fee, and contingency.

• Write off uncollectible balances only with authorization and documentation.

4. Accounts payable and payroll

• Enter and review vendor bills, including legal research, malpractice insurance, software, and expert costs.

• Match receipts to transactions and confirm coding to the correct account and matter.

• Reconcile payroll withdrawals to payroll reports and verify payroll taxes and benefits.

• Review contractor payments and confirm classifications and year-to-date records.

5. Month-end financial review

• Confirm all bank and credit card accounts are reconciled.

• Review the profit and loss statement, the balance sheet, and the cash flow statement.

• Compare current month revenue and expenses with the prior month and investigate large variances.

• Review revenue by practice area or matter, and collections and realization, where available.

• Note any tax or cash flow issues for the CPA.

• Close and finalize the period once corrections are complete.

6. Compliance records to keep

• Bank and credit card statements.

• Operating account reconciliation reports.

• The trust reconciliation report, trust bank statement, and client ledger report.

• Records supporting every transfer from trust to operating.

• The finalized monthly financial statements.

A timeline to close by the 15th

Download the checklist

You can use the sections above as your monthly close checklist. A downloadable version, with a check box for every item and the timeline built in, is available so you can run the same close every month.

How Numetix runs the monthly close

Numetix runs this entire checklist for a firm every month and closes the books by the 15th. Trust reconciled first and kept separate, operating accounts tied out, billing and payables current, and the financial statements reviewed and filed.

Numetix is a legal-specific service for small law firms of 3 to 20 attorneys. The trust compliance steps are never the thing that slips in a busy month, because they are the first part of the close, not an afterthought.

Frequently asked questions

How long should closing the books take?

With a clean process, a small firm can close within about two weeks of month end. A common target is to finish reconciliations in the first half of the month and finalize the close by the 15th.

What is the most important item?

The three-way trust reconciliation. The trust bank balance, the trust ledger, and the sum of client ledgers must match to the cent, with no negative client balance. It is what a bar auditor checks first.

Should trust work be kept separate?

Yes. Trust reconciliation, client ledgers, and earned-fee transfers are specialized tasks and should be their own workflow, so the compliance steps are never skipped in a busy month.

Want the monthly close run for you, closed by the 15th?Trust reconciled first, operating tied out, statements reviewed and filed, every month.

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Numetix · AI-augmented bookkeeping and trust accounting for small law firms · numetix.ai