Monthly trust reconciliation checklist

A one-page checklist for the monthly three-way reconciliation. It brings together the adjusted bank balance, the trust cash book and the total of client ledgers, with room to log exceptions and a sign-off block for the responsible principal.

Use it at each month end, even if you reconcile daily. Filebird runs the three-way reconciliation every day, but most firms still need a signed monthly record, and this is the page an auditor will ask to see. With daily checks behind it, the page usually takes minutes to complete.

What is inside

• Month-end steps in order, from downloading the bank statement to filing the signed page.

• A three-way balance table: the bank statement balance, deposits not yet cleared, unpresented cheques, the adjusted bank balance, the cash book balance and the total of client ledgers.

• An exception log for any difference, with what was found, how it was fixed and who checked it.

• A sign-off block for the person who reconciled and the responsible principal who reviewed.

• An audit filing checklist, so each month’s folder holds the same documents.

The page fits on a single sheet on purpose. A principal can review it in a few minutes, and an auditor can see the whole month at a glance without turning pages.

How to complete it

1. Enter the bank statement balance at the last day of the month.

2. Add deposits banked but not yet cleared, and subtract cheques not yet presented, to reach the adjusted bank balance.

3. Enter the trust cash book balance and the total of all client ledgers on the same date.

4. If all three agree, tick the box. If not, record the difference in the exception log and investigate before anyone signs.

5. Confirm that no client ledger is in debit.

6. Sign and date the page, then pass it to the responsible principal to review and sign.

If you reconcile daily, most of these figures come straight from the last daily reconciliation of the month, and the page becomes a record of a review rather than a calculation.

Allow time for the principal’s review. A reconciliation completed on the last day of the deadline leaves no room for questions, and a good reviewer will have some.

Reading the exception log

The exception log is the part auditors read most closely. Write each entry so someone who was not there can follow it: the amount, the cause, the fix and the date. “$90 difference, cheque 1182 entered as $1,540 instead of $1,450, corrected 3 November” is enough. “Fixed” is not.

An empty exception log is fine. A log that shows the same unexplained amount month after month is a finding waiting to happen.

If the same type of exception keeps appearing, such as receipts posted to the wrong ledger, note the pattern at the bottom of the log. It is a prompt to fix the routine, not only the entries.

Common mistakes

• Using the bank statement balance without adjusting for uncleared deposits and unpresented cheques.

• Comparing the bank with the cash book and forgetting the client ledgers, which is where allocation errors show up.

• Signing a reconciliation with an unexplained difference and a note to look at it next month.

• Completing the page weeks after month end, when the transactions are hard to trace.

• Filing the page without the bank statement it was reconciled against.

Store the signed pages in the same place every month. A missing month is easier to spot in a folder with eleven pages in it than in an inbox, and an auditor will ask about the gap.

Using it with Filebird

Filebird runs the three-way reconciliation every day and produces the month-end report with the balance table already filled in. Many firms still print this page and attach it, because it gives the principal a single place to review the month and sign, and because it is the format their auditor expects.

If you use it alongside Filebird, complete the exception log from the month’s daily exceptions. Each one should already have a note, so the log is a summary rather than a fresh investigation.

Firms with more than one trust account complete one page per account. Filebird produces a report for each, and the pages are filed together in the same monthly folder.

How to adapt it

• Print one copy per trust account if you hold more than one, including separate interest-bearing accounts held for a single client.

• Add your deadline for completing the reconciliation after month end.

• Add any extra reports your rules require, such as a list of ledgers with no movement in a year.

File the completed page with the bank statement and your exception notes, one folder per month. When the auditor asks, you send the folder.

This checklist is a starting point. Trust accounting rules, including deadlines and what must be kept, differ between jurisdictions. Check it against your law society or state bar’s rules (or your IOLTA requirements in the US) before you rely on it.