1. Home
  2. Payments

Trust Account Compliance

Updated

Get bills paid sooner with text to pay

Text bills and trust requests straight to your clients — only with Clio Payments.

Book a demo

For law firms in Australia that handle trust funds and need to comply with legal trust accounting regulations, effective trust account management is crucial. This guide provides specific instructions on how to use Clio Manage to record financial transactions into and out of trust accounts, establish and maintain these accounts in accordance with Australian standards, manage trust receipts and payments, perform trust account reconciliations, and more.

Note: These trust account management features are certified by your Law Society.

Enable trust account compliance

Before you can start managing trust accounts in Clio Manage, you need to enable the compliance feature in your Clio Manage account. Before enabling, ensure that Australia is the country set for your firm's business address. See Manage Account and Payment Information to learn more about updating your account information.

Important: Only administrators can enable this feature, but once enabled, any firm user can use its components. You cannot disable the feature on your own once it is enabled. If you need to disable it, you will need to contact Clio's support team.

Tip: Enable this feature first to create compliant trust accounts. You can close any existing trust accounts in Clio Manage.

  1. Go to Settings > Firm Preferences.
  2. Select the Compliance tab.
  3. Check the box for Apply the relevant legal trust accounting rules and regulations based on the state specified in your address.
  4. Check the box to Enable Trust Accounting Rules.
    • Once you enable trust account compliance for your Clio Manage account, you will need to create a new trust account or multiple trust accounts, depending on your firm. See Trust Account Management for more information.

 

Record matter trust balances in Clio Manage

After enabling trust account compliance, and once you have set up your trust accounts in Clio Manage, you can record any existing client trust balances from a previous system.

Important: Do not complete this workflow if you are mid-migration. Contact your migration agent before proceeding to avoid potential data discrepancies.

Step 1: Prepare data

Before importing trust balances into Clio, reconcile your trust account in your previous system for the last full month, and generate a Trust Trial Balance Report (the name may vary in other systems). This report will provide the matter trust account balances you need to record.

Tip: Consult with a Trust Accountant during the migration process to ensure all financial details are handled correctly.

  1. Reconcile the trust account in your previous system at the end of the month or the day of your choosing.
  2. Run a Trust Trial Balance Report from your previous system.
  3. Locate the matter balances from the report at the end of the month, and continue to Step 2.

    Tip: Individual matter balances from the end of the month will help with accurate receipts in Clio. If you cannot locate the appropriate report, contact your previous system support team to ensure you export the correct balances.

 

Step 2: Record existing matter trust balances

Once you complete the trust balance reconciliation in your previous system, you will need to create a new receipt in Clio for each matter listed on the report to record the balance. You can also record Law Society deposits.

  1. Go to Accounts and select your Trust Account.
  2. Click New receipt and complete the required information:
    • Date: Enter the end date of your last reconciliation.
    • Payment type: Select EFT.
    • Received from: Enter the client's name.
    • Select the appropriate Client and Matter.
    • Amount: Enter the amount from the Trial Balance Report.
    • Description: Enter Balance brought forward from [previous system].
  3. Click Create Record transaction.

Tip: When adding new receipts for uncleared payments, record the original transaction date for compliance purposes.

 

Step 3: Reconcile and review

The reconciliation process at this stage is optional. While not required, we suggest reconciling the closing balances from your previous system to match the opening balances in Clio Manage.

Note: After recording opening trust balances, if you need to match the input date of the balances to the transaction date, contact Clio Support. This option is available only for your FIRST reconciliation in Clio.

  1. After recording opening trust balances in Clio, reconcile the closing balance from your previous system to match the opening balances in Clio.
    • If you did not reconcile at the end of the month, reconcile to the date of the balance forwards.
  2. Ensure the trust balances from your previous system match the Trial Balance report in Clio.

 

Optional: Add uncleared payments

If your bank account had uncleared payments or trust transactions after your last reconciliation in the previous system, you will need to add these amounts to your trust account balance with a new receipt.

  1. Go to the main Accounts tab and select your trust account.
  2. Click New receipt, and complete the required fields.
    • Under Date, record the original transaction date.

 

Record Legal Society statutory deposit

Under s46 of the Legal Profession Uniform Law Application Act 2014 and s9 of the Legal Profession Uniform Law Application Regulation 2015 in Australia, law firms are required to deposit a prescribed amount from the money held in a general trust account into an ADI account maintained by their Law Society.

Important: Complete statutory deposits by the dates specified by your Law Society each year.

Step 1: Calculate deposit amount
  1. Go to the Statutory Deposit Calculator on your Law Society's website.
  2. Calculate the amount required for the statutory deposit.
  3. Pay the amount owed to your Law Society's ADI account.
Step 2: Record the payment in Clio Manage
  1. Confirm that trust account compliance is turned on for your account.
  2. Create a new company contact for your law society. Learn more about creating contacts here.
  3. Create a new matter for the contact. Learn more about creating matters here.
    • Under Matter description, enter Statutory Trust Deposit.
    • Under Practice area, select Statutory Trust.
  4. Go to the Transactions subtab and select your general trust account. 
    • If you recently enabled trust account compliance or do not have a general trust, create a new trust account in Clio Manage. 
  5. Select New payment and complete the required fields.
    • Client: Select the Law Society contact.
    • Matter: Select the Statutory Trust Deposit matter.
    • Recipient: Enter the name of your Law Society (i.e., Law Society of New South Wales).
    • Description: Enter Statutory Deposit.

 

Create, view, and download trust receipts

When you receive funds from a client for a specific matter, you can create a trust receipt to record the funds. Once created, each transaction will receive an automatic receipt number under the Transactions column of the receipts table. You can also view and download any of your recorded trust receipts.

Create trust receipt View and download
  1. Go to Accounts.
  2. Select the trust account where the funds will be allocated.
  3. Select New receipt. 
  4. Complete the required fields.
    Important: If you select Cash or Cheque under Payment Type, you are also required to create a trust deposit record. Learn more about creating trust deposit records below.
  5. Click Record transaction. 

 

Create, view, and download trust deposits

After recording a cash or cheque receipt, you will need to create a deposit record. When depositing the funds, you will need to show these records to your banking institution.

Create trust deposit View and download
  1. Go to Accounts.
  2. Select the trust account where the funds will be allocated.
  3. Select Deposit funds. 
  4. From the list of undeposited transactions, select the transactions that you want to deposit.
  5. Enter the Deposit reference and select the Bank account and Deposit date.
  6. If you are depositing any cash deposits, enter the dollar values under Coins and Notes for the amount of cash coins and cash bills.
  7. Under Transactions, select the cash and/or cheque deposits that you want to deposit.
  8. Click Save deposit.

 

Record and view trust payments

You can use funds held in trust accounts to pay bills and cover third-party expenses related to a matter. You can pay third-party bills from trust funds by recording a trust payment directly to the third party or by recording the expense on a bill and applying trust funds to the generated bill. When a transaction is recorded, you can view it in the trust account. Each transaction will have its own automatic receipt number under the Transactions column of the receipts table. 

Note: Trust funds can only be applied as payment for bills associated with the matter. You can transfer funds between matters and view all transferred funds in the trust journal report.

Record trust payments Apply trust funds to bills View transactions
  1. Go to Accounts.
  2. Select the trust account from which you will make the payment.
  3. Click New payment.
  4. Complete the required fields for the recipient.
  5. Complete the required fields for the client and matter from which the funds will be withdrawn.
    • Select a matter to view the matter's trust balance. If the account does not have sufficient funds, you will see a warning that the account will be overdrawn. If you proceed with the payment, the client's account will go into an overdrawn state. You can report on overdrawn accounts using the trust overdrawn report.
  6. Click Record transaction.

 

Void cheque payments

In order to comply with Australia trust account compliance rules, you are required to record all cheques. If a cheque is damaged and you need to void it, you can record a transaction of the voided cheque. 

  1. Go to Accounts and select the appropriate trust account.
  2. Click New payment.
  3. Under Payment type, select Cheque and add the reference number for the damaged cheque.
  4. Select the box next to Void Cheque.
  5. Under Reason, enter the reason why you are voiding the cheque.
  6. Click Record transaction.

 

Cancel transactions

If you record a trust transaction incorrectly, you cannot edit the transaction. You can correct an error on a recorded trust transaction by cancelling the incorrect transaction and creating a new trust transaction. Once cancelled, you will see a new transaction with the same receipt number as the original transaction. This transaction will show as a debit (funds out) and have a description that specifies it is a reversal of the original transaction.

Important: Cancelling trust transactions is a permanent action. You cannot undo or recover the cancelled transaction. 

Cancel trust transaction Send client cancelled transaction receipt
  1. Go to Accounts and select the appropriate trust account.
  2. Under Transactions, find the transaction that you want to cancel.
  3. Click the down arrow next to Edit and select Delete.
  4. Select the date.
  5. Click Delete.

 

Perform trust account reconciliation

Trust account reconciliation compares trust transactions in Clio Manage with transactions from your bank during a given month. You are required to perform reconciliations monthly within a few days after the end of the month. 

Step 1: Record trust transactions, receipts, and deposits in Clio

Before beginning a reconciliation, you need to record all trust transactions and trust receipts and create bank deposits for the reconciliation period in Clio Manage. Learn more about trust funds reconciliation in Clio Manage here.

 

Step 2: Create reconciliation adjustments

If you have discrepancies in a trust account, you can add adjustments to calculate the adjusted balance. You can either deduct funds or add new funds to the trust account. 

  1. Go to Accounts and select the appropriate trust account.
  2. Click Add adjustment.
  3. Complete the required fields.
  4. Click Add. 

 

Need more help?

Was this article helpful?
0 out of 0 found this helpful