Trust Accounting Comes Before Either Audit Tool

Every state bar requires client funds, unearned retainers, settlement proceeds, advanced costs, to sit in a separate trust or IOLTA account, reconciled to the penny against a client ledger showing exactly whose money is whose. Commingling trust funds with the firm's operating account, even briefly, even by accident, is one of the fastest paths to a bar disciplinary action or disbarment.

Neither FloQast nor AuditBoard is a trust accounting system. That job belongs to dedicated legal practice management or trust software built around three-way reconciliation, bank balance, book balance, and client ledger balances all tying out together. If your firm's trust accounting isn't already handled by a purpose-built system, fix that first. It's the one control gap here that carries personal professional risk for the partners, not just a finding in a management letter.

Once trust accounting is handled separately, FloQast and AuditBoard apply to the firm's operating side: revenue recognition for hourly and flat-fee matters, unbilled time reconciliation, partner draws, and, if the firm is large enough to have one, a documented set of financial controls a lender or acquirer would want to see tested.

FloQast fits the reconciliation and close side of that: tying unbilled fees to time entries, enforcing a second reviewer on partner draws, standardizing the monthly close. AuditBoard fits the governance side: if the firm needs a formal, tested control framework, usually because of a lender covenant, a merger, or a malpractice insurer's requirements, that's where a GRC platform organizes and evidences it.

A firm working personal injury or other contingency matters advances real cash for case costs, expert witnesses, filing fees, medical record requests, that sits as a receivable until the case resolves. If the case settles, those costs get reimbursed from the settlement before the client and firm split what's left. If the case is lost, the firm typically eats the advanced cost entirely.

That receivable needs its own reconciliation, tied to the specific case, with someone tracking recoverability the way a project accountant tracks work in progress on a fixed-price contract. A firm carrying a large book of contingency cases without a disciplined way to track advanced costs per matter is carrying more write-off risk than its balance sheet shows until a case actually resolves.

Picture a personal injury matter that settles for a set amount. The trust account receives the full settlement, disburses medical liens and advanced costs first, pays the client their share, and releases the firm's contingency fee to the operating account, all from the same trust ledger entry chain. The trust side of that disbursement lives entirely in the firm's trust accounting system, reconciled the same day.

What lands on the firm's own books afterward, the earned fee revenue and the write-off or recovery of the advanced costs the firm fronted, is what a close reconciliation in FloQast would tie out: confirming the fee recognized matches what trust actually released, and that the advanced cost receivable was closed out correctly rather than left sitting on the books as if it were still collectible.

Most law firms, including firms with real revenue and dozens of attorneys, never need a formal enterprise GRC platform. The firms that do are usually part of a private-equity-backed management services organization structure, a real and growing trend in law, negotiating a merger, or facing a lender covenant that specifically requires documented, tested internal controls rather than a clean set of financials.

If none of that applies, put the effort into close discipline on the operating side and, above all, an airtight trust reconciliation process. That combination covers what actually creates risk for a law firm far more than a governance platform built for public-company SOX testing does.

A sensible order of priorities for a law firm:

1. Keep every dollar in the IOLTA trust account traceable to a specific client and matter, using dedicated trust accounting software with three-way reconciliation.
2. Reconcile contingency fee and case cost balances by matter, and write off unrecovered advanced costs to expense once a case is closed or lost.
3. Consider close management software when operating-side reconciliations become unreliable to track by hand.
4. Consider a GRC platform only when a lender, buyer or other specific requirement asks for documented controls.