First Step: Understanding Firm-Specific Policies

We did not start by blindly issuing checks.

We first started with gathering firm-specific policies and understanding the firm’s way of working.

We prepared a full list of all pending cases. Then we segregated those cases based on priority:

• High priority
• Medium priority
• Low priority

This helped us bring structure to the backlog.

Building the Right Team

We selected the right team for the task and trained them on the firm-specific policies and knowledge.

This was important despite the pressure.

When there is pressure, it is tempting to start issuing checks immediately. But in check writing, especially where IOLTA and settlement money are involved, starting without understanding the firm’s policy can be fatal in the long run.

Once the team was ready with the firm’s policies and process, we started cleaning the check writing backlog.

Three-Level Review Process

During the backlog cleanup, we followed a three-level review process:

1. Preparer

The preparer’s role was to prepare the check writing work based on the final payout, trust accounting details, and supporting documents.

The preparer checked the matter, payee, amount, payout document, supporting evidence, and accounting treatment.

2. Reviewer

The reviewer checked whether the preparer had done the work correctly.

This included reviewing the supporting documents, amount calculation, payee details, matter reference, and check treatment.

3. Closer

The closer gave the final confirmation before the check was treated as ready.

The closer’s role was to confirm whether everything was absolutely correct.

Dealing with money does not require haste. It requires discipline. We followed this system despite the pressure.

Issues Found During the Process

During the process, we found many mistakes from the past accounting work.

In some cases, one due payment had effectively been paid twice because the client defrauded the firm and encashed checks multiple times.

We also found many cases where only the client checks had been issued by the previous accounts payable manager, while the remaining checks for that matter were still pending.

We identified those cases, reviewed the matter records, and issued the remaining checks required for those matters.

Positive Pay Bank Reporting

We also devised a reporting process for the bank’s Positive Pay system.

This reporting was done every day.

Positive Pay reporting became an important part of the control process because it helped the firm report issued checks to the bank and reduce check-related risk.

Revenue Reporting Cleanup

In this case, the client maintained its own internal report where the CFO wanted all cleared cases to be reported into a revenue sheet.

This report recorded details such as:

• Business done in each month
• Fees realized
• Fees shared with referring attorneys
• Which referring attorney brought how much business
• Other revenue-related internal tracking

That reporting had been pending for almost a year.

We checked each and every case and updated the revenue reporting sheet accordingly.

Filevine and QBO Integration Work

During the process, we also set up a call with the Fuel Digital team, which takes care of the Filevine-QBO integration.

We highlighted issues to their team, and they helped resolve them.

We also asked them to change various underlying settings.

For example, our client was not booking everything into trust liability. They were creating separate accounts such as:

• Client medical expense
• Client payments
• Referring attorney checks

We changed the setting in such a way that the client could get the right bifurcation, while at the same time everything was booked properly into trust liability.

This helped improve the trust accounting structure and made reconciliation cleaner.

Templates Created During the Process

We created various templates during the process.

These included:

• Memo templates
• Address-checking templates for each check type
• Templates for checking underlying documents for the name on the check
• Templates for determining whether the check amount is correct
• Templates for firm-specific review process

Every client differs. So the template cannot be fully generic. Each firm needs its own check writing template based on its policies, software setup, and internal process.

Operating Check Policy

During the process, we also helped the firm devise a policy for clearing operating checks.

Earlier, the firm had a rough operating policy or way of doing things, but it was not clean and clear. It had several issues.

We worked with the CFO and helped devise a complete operating check policy.

We also made sure that everyone followed the policy before asking for checks from the operating account.

Time and Team Involved

It took around 1.5 months of constant work to clear the backlog.

At any point of time, 6–7 team members were involved in the process.

What This Case Shows

This case showed us that check writing for a personal injury law firm is not just a clerical task.

It is connected with:

• Client payouts
• Medical provider payments
• Referring attorney payments
• IOLTA accounting
• Trust liability
• Filevine-QBO integration
• Positive Pay reporting
• Revenue reporting
• Operating account policy
• Internal controls
• Monthly reconciliation

The backlog was large. The pressure was real. The data was not clean. But we built the process step by step, trained the team, followed a three-level review system, created templates, improved the Filevine-QBO setup, and cleared the backlog.

This is the kind of backend check writing process PI Ledger is built for.

Historical Review from 2010

We started analyzing the books from 2010, when the firm began maintaining records.

But there was a catch.

The client had maintained trust accounting records in multiple places. Their trust accounting books were maintained across four different QBO instances.

So the first step was to merge and consolidate the data for all years.

We finalized one QBO instance as the base QBO and started building the reconciliation from there.

Deposit Entries Were Not Recorded in QBO

Once we started reviewing the books, we noticed that the firm had not recorded deposits properly in QBO.

They were mainly recording checks issued to external parties, but the deposits were not entered in QBO as proper accounting entries.

The firm did have an offline version of deposit records, but those records were more for internal revenue tracking. They were not maintained from a proper accounting and reconciliation perspective.

This made the trust reconciliation much more difficult.

Reconstructing Deposits from 2010

Getting deposits from 2010 onward was a very difficult task.

We decided on a cut-off date and then started matching deposits in QBO from that point onward.

During deposit matching after the cut-off date, we found that around USD 900,000 of deposits were never received in the bank, but checks had already been issued for those matters, and the matters had been archived.

This was an eye-opener for the firm as well as for us.

After that, we started reviewing the data more granularly.

Deposit Matching Challenges

Deposits had many challenges.

In some cases, one deposit was received after our cut-off date, while another related deposit was received much before our cut-off date. This generally happened in MedPay cases.

In some cases, the deposit was received during our review period, but checks had already been issued before the cut-off date.

These timing issues created complexity in the accounting and reconciliation.

Bulk Deposits in PI Law Firms

Deposits in personal injury law firms are often not made client-wise.

Law firms usually collect all checks received during a specific period and deposit them together. In the bank statement, this appears as one single deposit. But that one deposit may include checks from many different cases.

For example, one bank deposit may comprise deposits from 100 different cases.

This creates a special problem in trust accounting.

Banks do not always provide detailed data beyond a specific period. So for many deposits within our cut-off period, we did not know directly which cases were included in that particular bank deposit.

To solve this, we had to use multiple sources from the client’s internal data to figure out what comprised each deposit.

We matched around 9,000 individual deposit records with around 350+ single deposit entries appearing in the bank.

Multiple IOLTA Accounts and Different Banks

The firm maintained three different IOLTA accounts across three different banks.

Each bank had a different way of reporting.

We first understood how each bank reported deposits, checks, and supporting data. Then we worked separately for each bank.

In some cases, the bank provided a bifurcation showing that one deposit entry comprised many individual checks. It also provided check copies.

We had to manually pull data from those check copies and match it with QBO.

That was difficult and time-consuming.

Another problem was that bank data did not have the case ID on the check. It only had the name.

So we had to manually check the name in the case management software and match it with the correct case.

In some cases, two people had the same name and the same settlement amount. In those situations, we had to go deeper and match using additional details such as the accident date.

It was a manual task, though we used AI wherever possible.

Since the firm had not pushed the deposit entries into QBO, we manually posted all required deposit entries so that we could reconcile them with the bank.

Cleaning the Check Side

Once the deposit side was in better shape, we started working on the expense side — mainly the checks.

We first reconciled all checks that had cleared in the bank.

During this process, we found many challenges.

Sometimes the check number posted by the bank was wrong. In those cases, we had to go to the bank portal and check whether the check copy was available. If the check copy was available, we verified the correct check details from the check image.

Where check copies were not available, we had to identify the check based on amount, clearance date, and other available information.

In some cases, we noticed that an entire series of checks was different in QBO compared to the bank. This happened because, after printing checks, QBO data had been changed.

Duplicate Encashment and Fraud Issues

During the check reconciliation process, we found that some single checks had been encashed multiple times.

This amounted to a fraud issue of around USD 150,000.

We reported this to the CFO, and the firm took it up with the bank.

We also discovered cases where advance checks had been issued to clients long back, but at the time of final settlement, the lien was mistakenly not considered. This led to double compensation to the client.

We identified losses of around USD 250,000 in such types of cases.

This also included cases where duplicate checks were issued to parties and both checks were encashed because the old check had not been voided before issuing the new one.

This is how we cleaned the expense side of the trust accounting books.

Base Data Was Still Not Enough

Once deposits and checks were cleaned, we initially thought the base data was correct and that final reconciliation numbers would now be ready.

But that was far from true.

When we started reviewing individual customer ledgers, we noticed many negative balances.

A negative customer ledger usually means checks were issued for more than the deposit available for that matter. But in this case, the reasons were not simple. They varied from case to case.

Negative Customer Ledger Issues

We identified several reasons for negative balances.

1. Deposit in One IOLTA, Checks from Another IOLTA

In many cases, the deposit was received in one IOLTA account, but checks were issued from another IOLTA account.

This was very difficult to identify and reconcile.

We had to trace the deposit from one account and match it with the check issued from another account. We then reported the difference to the CFO.

The CFO transferred funds from one IOLTA account to another to correct the position.

This was a huge number — more than 300 cases, amounting to millions of dollars.

2. Checks Issued During Review Period, Deposits Before Cut-Off Date

In some cases, checks were issued during our review period, but the related deposits had been received before the cut-off date.

Because of this, the books showed negative balances.

We had to verify whether deposits had actually been received for those cases before the cut-off date and then account for them properly in QBO.

3. Replacement Checks Without Voiding Old Checks

In some cases, replacement checks were issued without voiding the old check entry.

Even though only one check was encashed in the bank, the customer ledger showed a negative balance because both check entries existed in the accounting records.

We had to manually review those cases and correct the reporting.

4. Substituted-Out Client Matters

In some matters, the client had substituted out the law firm.

Fees were never accrued from the lien deposit received.

Those cases had remained hanging for a long time and needed separate review.

Fee Timing Difference in Three-Way Reconciliation

The ultimate issue in the three-way reconciliation was fees.

The client we worked with transferred fees from the settlement on the date the settlement was received. These were tentative fees.

However, in QBO, we accounted for fees based on when they actually accrued to the firm.

Because of this, there was a timing difference between the bank balance and trust liability.

This timing difference had to be properly identified, documented, and considered in the three-way reconciliation.

What This Case Shows

This engagement started as a simple BAR reporting reconciliation.

But in reality, it required:

• Historical review from 2010
• Consolidation of four QBO instances
• Selection of one base QBO
• Manual deposit reconstruction
• Matching around 9,000 individual deposit records with 350+ bank deposits
• Review of three IOLTA accounts across three banks
• Understanding of different bank reporting systems
• Manual review of check copies
• Matching bank data with case management software
• Use of AI wherever possible
• Manual posting of deposit entries into QBO
• Reconciliation of cleared checks
• Review of wrong check numbers
• Review of changed QBO check data
• Identification of duplicate encashment and fraud issues
• Identification of advance-check and lien-related double compensation issues
• Review of duplicate checks and old checks not voided
• Analysis of negative customer ledger balances
• Cross-IOLTA reconciliation
• Review of substituted-out matters
• Fee timing difference analysis
• Final three-way reconciliation support

Our Learning

This case showed us that trust accounting for a PI law firm is not just bank reconciliation.

It is matter-wise accounting of client funds.

Settlement deposits, MedPay, checks, liens, client payouts, referring attorney payments, attorney fees, IOLTA transfers, QBO entries, bank records, and case management data all need to connect.

Only after that can trust liability, individual customer ledger, and adjusted bank balance be reconciled properly.

This is the kind of detailed backend trust accounting work PI Ledger is built for.