Trust Accounting Overview

Smokeball provides a litany of trust accounting features to help your firm succeed, ranging from payments, credit card deposits, reports, and bank reconciliation. In this article, we will guide you through the core components of trust accounting with links to more in-depth resources where applicable.

Setting up your Trust Account

The first step in trust accounting is to verify that the trust account details in Smokeball are correct. 

1. Select the Settings icon on the bottom-left corner of the Smokeball Web App, then select Firm Settings.
   
2. Click on Accounts from the left menu and navigate to the Trust Account Settings tab. By default, there should already be a Trust Account on this page for you to modify. Click on the Trust Account to edit it with a trust account name/display name of your preference, the state, and bank name.
3. If you have multiple trust accounts, select the blue Add Trust Account link to add them.
4. Choose the default payment accounts for your state of practice and all states using the dropdown menus. 
   • Note: You can also add more than one trust account. 
5. Optional: You can toggle on all the settings under the Trust and Operating Account Options to readily view, print and email PDFs of any trust transaction made.
   

Learn more about trust account settings. 

Recording Trust transactions

In Smokeball, trust transactions are handled from within a client's matter. You will need to follow these three steps to make any trust transaction:

1. Open a matter in the Smokeball Web App.
2. Select the Transactions tab.
3. On the left panel, click on your trust account.

The buttons underneath the trust account name and number are all the trust transaction actions you can take. We will explain each of these buttons in sequence. 

Deposit funds

Use this button to record a client deposit:

1. Click on Deposit Funds.
2. A window will display on the screen, with the default date set to today's date. You can edit this date to reflect backdated deposits. Make sure the date field is correct: an incorrect date will affect your bank reconciliation (especially if the deposit occurred at the beginning or end of a month).

3. By default, the client's name on the matter will be populated in the Received From field. Select the X icon to replace them with an existing contact, or select the + icon to replace them with a new contact.
4. Enter the amount to deposit, the payment method, the reason for depositing and any internal notes.
   • Anything entered into the Reference field will show up on the Trust Receipt PDF.
   • Anything entered as an Internal Note will not show up on the Trust Receipt PDF.
   • Both the Reason and Internal Note can be viewed when clicking on the deposit transaction in the Transactions tab.
5. Once you are done with recording the deposit, select Process.
6. Optional: Learn more about depositing funds in trust accounts. 

To make a reversal or deletion, click on the transaction from the Transactions tab then select Reverse or Delete and enter the reason for the reversal or deletion. 

All reversals and deletions will be noted in a separate line in the Transactions tab for audit purposes.

Learn more about reversing or deleting transactions.

Make a Trust Payment

You can also pay money out of a client's trust account:

1. Click on the Trust Payment button.
2. Verify that the date field is correct.
   • An incorrect date may affect your bank reconciliation, especially if the payment was made at the beginning or end of a month.
   • If your firm has multiple trust accounts, also ensure that you select the correct one from the Account dropdown menu.
3. Start typing the name of a contact in the Paid To field to select an existing contact. Otherwise, select the + icon to add a new contact.
4. Choose the payment type from the Type dropdown menu. Depending on what is selected here, enter additional information about the payment.

Learn more about recording trust payments. 

Transfer funds to another matter

For clients with multiple matters who have authorized their funds to be moved between matters, you can create a journal transfer by selecting Transfer Funds. 

Even though transfers are money movements between matters, still make sure that all details are correct before processing them. 

Learn more about transferring funds to another matter. 

Process trust deposits from clients paying by credit card

Process trust deposits via credit card with the Credit Card Deposit or Credit Card Deposit Request options.

Select Credit Card Deposit if you are processing the credit card payment right now, i.e. if you are on the phone with the client or they are physically at the reception desk. Any relevant fees and charges are outlined to you as you enter the deposit amount.

Select Credit Card Deposit Request to send an email to your client with a link to the credit card payment portal, where they can make a deposit via credit card in their own time. Any relevant fees and charges will be outlined to them at the point of payment.

Learn more about credit card payments for trust deposits. 

Protect Trust Funds

You can also lock away funds in a matter to prevent being able to disburse too much money from the trust account. This is a way to hold proceeds while waiting for a divorce to finalize, holding escrow, etc. 

1. Click on Protect Funds.
2. Enter the reason for protecting funds, and the amount to be protected.
3. Select Process.

To view all amounts protected and to also un-protect funds, select Protected Funds from the left menu, under the Trust Account name.

Learn more about protecting funds in trust retainer accounts.  

View and print an account statement

Select View Statement to generate a PDF account statement for all invoiced transactions. This statement will include trust transactions. 

Record payment to an invoice

Once a client has paid off an invoice sent from Smokeball Billing, make sure you have marked the invoice as paid. You can do so one invoice at a time or in bulk.

For single invoices:

1. Open the finalized invoice and select the Add Payment button.
2. Enter the payment details in the pop-up window and select Process once all payment details have been entered. You can apply payment from the trust account using the Type dropdown menu.
3. Optional: Learn more about adding payments to a single invoice. 

You can also add a trust payment when finalizing the invoice.

For multiple invoices: 

1. From the Invoices tab in the matter, click on the invoice and select Add Payment.
2. Ensure the correct payment date and trust account are selected as entering the wrong information will affect your trust reconciliation.
3. Enter the rest of the details and select Process.
4. Optional: Learn more about adding payments to multiple invoices.  

Invoice payments will be transferred to the operating account and entered into the Transactions tab of the matter as Transfer to Operating for payment.

Bank reconciliation 

You can reconcile bank accounts in Smokeball on a weekly, monthly, or quarterly basis. Our recommended practice is to reconcile monthly. However, you will need to follow the same setup steps regardless of your preference.

Get started by navigating to the Accounts view from the left menu and then select the Bank Reconciliation tab.

Completing a trust reconciliation

To start reconciling:

1. Select Create Reconciliation from the Bank Reconciliation tab.
2. Enter the end date of the month or period in the field on the right-hand panel and enter the closing balance of your trust account bank statement in the Bank Statement Balance field. 
   • E.g. if your bank statement is for the period March 1 to March 31, enter the closing date as March 31 and the balance at the bottom of the bank statement as of March 31.
3. Now your goal is to make sure the list of transactions in the Payments and Receipts tab matches the transactions in your trust account's bank statement. 
   • Use the tick boxes next to each transaction to tick as you go when comparing transactions to your bank statement.
   • Reversed transactions will also show on this list. You will need to select the toggle if you want to see deleted transactions. Make sure you have ticked both the original transaction and its reversal so that the transactions cancel themselves out.
4. Ideally, the Reconciliation Balance figure is shown in blue with a $0.00 difference. 
5. Finalize by selecting Reconcile.

If the balance does not match even after ticking all transactions, check the following: 

• Check that reversals or deletions have been applied properly.
• If the bank statement has transactions that are missing from Smokeball, recreate these transactions in Smokeball.
• If there are duplicate transactions in Smokeball, reverse or delete the duplicates.
• Check transactions that were made close to the beginning or end of the month. A transaction may have been made at the end of the month but is to be recorded in Smokeball at the beginning of next month, or vice versa. To fix this, make a temporary adjustment:
  1. Select the Adjustments tab and Add Adjustment. 
  2. Enter the date of the adjustment and the amount.
  3. Select Withdrawal to add this amount as a debit, or Deposit to add this amount as a Credit.
  4. Select Add.
You can revisit this adjustment in the next reconciliation by cancelling it out with the actual bank statement transaction.

You can also reconcile on a more frequent basis (e.g. weekly, quarterly) as long as all bank transactions have been settled in that period. To do this, enter a different end date on the reconciliation panel.

Additional Resources

If you are new to Smokeball Bill, visit our introductory page to view all available resources. 

You can run the Trust Balances Report to verify that you have brought over existing client balances successfully.

You can learn more about bank reconciliation in our dedicated article.