Client funds do not allow for assumptions, rushed work or unclear ownership. The right trust accounting questions help a law firm identify weaknesses while they are still operational problems, rather than after they become a compliance issue, client complaint or shortage that requires urgent investigation.

For principals and practice managers, the challenge is rarely a lack of goodwill. It is that trust accounting sits across people, process, software, banking, matter management and supervision. When workloads rise, a small shortcut – an unreviewed receipt, delayed reconciliation or unclear file note – can have consequences far beyond the original transaction.

This is a practical set of questions for Australian law firms looking to strengthen the way client money is received, recorded, authorised and reviewed. Requirements differ between jurisdictions and practice types, so firms should always apply their relevant legal profession rules and seek specialist advice where needed.

Trust accounting questions that expose process gaps

Can we identify the matter, purpose and authority for every transaction?

Every receipt and payment should tell a clear story without relying on someone’s memory. If a reviewer opened the ledger, bank record and matter file months later, could they see whose money it was, why it was received or paid, and what authority supported the transaction?

This question becomes particularly relevant where a firm handles high volumes of conveyancing settlements, estates, family law matters or commercial transactions. Similar client names, repeating disbursements and time-sensitive payments create opportunities for a transaction to be allocated to the wrong matter or processed on incomplete instructions.

A sound process records the relevant matter reference, payer or payee, amount, purpose, date, supporting documentation and authorisation. The detail needs to be sufficient for a person outside the original transaction to understand it. A short, vague narration may save seconds at entry but cost hours during a review.

Who can initiate, approve and release payments?

Separation of duties is one of the most useful controls in a trust environment. The person entering a payment should not be the only person who can approve and release it. In a sole practitioner or smaller practice, complete separation may not be practical, but compensating controls can still be put in place.

For example, the principal may review payment reports, bank activity and supporting authorities at set intervals, even if a trusted staff member prepares the transaction. The point is not to create unnecessary layers. It is to make sure no one person can move client money without visible oversight.

Firms should also ask whether user permissions match current roles. Staff who have changed positions, left the firm or no longer work in finance should not retain access simply because it has not yet been reviewed. Access reviews are easy to postpone and difficult to explain after an incident.

Are authorities specific, current and retained with the matter?

A request to pay funds is not always an authority to pay funds. Instructions may be incomplete, conditional or superseded by later correspondence. This is especially common in matters moving quickly, where instructions are given by email, telephone or through several people in the client team.

Build a clear standard for what acceptable authority looks like. It should identify the client or matter, amount, destination, purpose and timing of the payment. Where instructions are verbal, staff should record them promptly in accordance with firm policy and confirm them appropriately.

The practical question is whether your team could produce the authority quickly if an auditor, principal or client asked for it. If the answer is that someone would need to search inboxes, personal folders and handwritten notes, the record-keeping process needs attention.

Reconciliation is a management task, not a monthly ritual

Are reconciliations completed on time and independently reviewed?

Reconciliation is where the trust bank balance, trust cash book and individual client ledger balances are tested against each other. It is not a box-ticking exercise. It is the control that can reveal duplicate entries, bank fees, stale transactions, incorrect allocations and unexplained differences before they compound.

Ask not only whether reconciliations are completed, but when, by whom and with what evidence of review. A reconciliation completed late may still be technically completed, yet it gives management less opportunity to act on issues. A review that consists of an unexamined signature is also unlikely to provide meaningful assurance.

The reviewer should understand enough to challenge unusual items. Long-outstanding cheques, negative ledger balances, unexplained adjustments and repeated manual journal entries deserve closer attention. Some items will have legitimate explanations. The concern is when the firm cannot establish those explanations promptly.

Do we investigate exceptions rather than simply clear them?

Pressure to finalise a reconciliation can lead teams to use temporary adjustments, suspense-style entries or broad descriptions that remove a difference from view without resolving its cause. That approach transfers risk to the next month and makes the ledger less reliable in the meantime.

A better approach is to maintain an exceptions register. Record the issue, date identified, impact, owner, action taken and date resolved. This gives principals and practice managers a simple way to see whether exceptions are isolated or recurring. A pattern of small errors may point to training gaps, poor handovers, unclear work instructions or a system configuration problem.

Questions for firms using bookkeeping or managed support

Delegating administrative work does not delegate accountability. Whether trust accounting support is handled by an employee, a bookkeeper or a managed service provider, the firm must remain clear about who does what, who reviews it and how the work is evidenced.

Start with the workflow. Which tasks can support staff prepare, such as data entry, document collation, ledger maintenance and reconciliation packs? Which tasks must be undertaken or approved by authorised people within the practice? The answer depends on applicable rules, the firm’s risk settings and the competence of the people involved.

A capable support team should work from documented procedures, matter-based instructions and defined escalation points. They should know when to stop rather than guess. That is particularly valuable where there are missing authorities, mismatched bank details, unclear client references or unusual payment requests.

For firms using offshore or cross-border support, security and supervision need the same level of attention as process quality. Consider access controls, secure systems, device management, confidentiality obligations, audit trails, training and escalation channels. Time-zone coverage can improve turnaround, but it should never create a situation where a transaction progresses without adequate review.

SBA’s managed resourcing model is designed around visible workflows, trained team members and Australian-led oversight, which is the standard firms should expect from any provider handling sensitive operational work.

Are we treating cyber risk as a trust accounting risk?

Payment redirection fraud is not solely an IT problem. It is a trust accounting risk because fraudulent bank details can result in client money being sent to the wrong destination. Cyber criminals often exploit routine behaviour: an email that looks familiar, a late change to settlement details or a request framed as urgent.

Your team should ask how bank detail changes are verified. Email alone is generally a weak control. A documented callback process using independently sourced contact details, paired with appropriate approval, gives the firm a stronger basis for acting. Staff also need permission to slow down a payment when something does not look right.

Other useful questions include whether multi-factor authentication is active, whether shared logins exist, how payment templates are controlled and whether staff know how to report a suspected compromise. Technology controls matter, but clear behaviour under pressure matters just as much.

What does the principal see each month?

A principal cannot supervise every transaction personally, particularly in a growing firm. They can, however, receive a concise monthly view of trust activity and exceptions. This might include reconciliation status, outstanding issues, negative balances, aged funds, unusual payment activity, access changes and any policy departures.

The report should be useful enough to prompt questions, not so detailed that it goes unread. A two-page report with clear exceptions is often more valuable than a long export from accounting software. It also creates a regular governance rhythm: issues are raised, assigned and followed through before they become normalised.

The best trust accounting process is not the one with the most forms. It is the one your people can follow consistently, your principals can supervise confidently and your firm can explain clearly when a client asks what happened to their money. If your current process relies too heavily on individual memory or heroic effort, that is a worthwhile place to start the conversation.