Law Firm Month-End Close: 6 Things to Settle Each Month

Law Firm Month-End Close: 6 Things to Settle Each Month

A law firm month-end close is the short, repeatable routine that turns a month of transactions into numbers you can trust. Done every month, it takes hours. Skipped for a quarter, it becomes a cleanup project, and the first thing it finds is often a reconciliation nobody has done.

Here are six things to settle each month, in the order that keeps the work quickest. The numbering is a sequence, not a ranking. One firm to ask about the books side is Legal Ease, a Fort Worth bookkeeping firm that specializes in law firms. Legal Ease is a vetted Sam's List member and a paying member of our featured program; payment does not buy the language we use or its reviews. How we chose is at the end.

1. Start the Law Firm Month-End Close With the Operating Account

Reconcile the operating bank account first. Match every transaction on the bank statement to the books, clear what has cleared and investigate what has not. The goal is a book balance that equals the bank balance, adjusted for items still outstanding, and a short list of what the differences are.

Do this for every account, not only the main one: the credit card, the payroll account, any savings account and any line of credit. A small firm can have five or six, and the one nobody looks at is the one that hides the problem.

Look for duplicates, bank fees nobody booked and deposits that cannot be tied to a client or a matter. They are easier to explain a month after they happen than a year after.

The limitation: a balanced reconciliation proves the books match the bank, not that every transaction was coded correctly. An expense put in the wrong category still reconciles.

2. Complete the Three-Way Trust Reconciliation as Its Own Step

Client money held in trust is different, and it gets its own reconciliation. Many state bars require a three-way trust reconciliation, generally monthly. You compare three numbers: the bank statement balance for the trust account, the firm's trust account book balance and the total of the individual client ledgers. All three should agree, after outstanding items.

When they do not, the difference is the problem to chase, today. A client ledger that is negative means the firm spent one client's money on another's behalf. A bank balance that is higher than the ledgers can mean earned fees were never moved out.

Do this separately from the operating account, and keep a signed, dated copy of each month's reconciliation. If the bar ever asks, the file is the answer.

The limitation: the requirements differ by state, including how often you must reconcile and what you must keep. Check your bar's rules, not a general summary, including this one.

3. Review Unbilled Time and Costs Before You Close

Work that has not been billed is real work and it is real money, but it is not on the books until someone puts it there. Each month, review unbilled time and costs by matter: hours entered but not invoiced, and costs the firm advanced for clients that have not yet been recovered.

Costs deserve special attention. A filing fee or expert deposit paid from the operating account is an advance the client generally owes back. If it is booked as an ordinary expense and never tied to the matter, it is never billed, and the firm pays for the client's case.

Ask who owns the review. If the lawyers enter time and the bookkeeper enters costs, someone has to compare the two so that nothing sits unbilled because each side assumed the other had it.

The limitation: whether a cost can be recovered depends on the fee agreement and on the rules of the matter. A cost the engagement letter does not allow you to bill is a firm expense, not an asset.

4. Run an Accounts Receivable Aging Report

Accounts receivable aging sorts what clients owe by how long it has been owed: current, 30, 60, 90 days and beyond. For a law firm it is the closest thing to a pulse. A growing balance past 60 days says collections are slipping, even in a month when billing looked strong.

Run it by client and by matter, and read it as questions. Why has this invoice been open for 90 days? Is the client disputing it, did it go to the wrong person or is nobody following up? Assign each old balance to a person and a next step.

Look at the total too. If receivables are rising faster than revenue, the firm is financing its clients, and cash will feel tight even when the profit and loss statement looks fine.

The limitation: an aging report shows what is owed, not what will be collected. Some old balances will never be paid, and writing them off is a decision the firm has to make, not a default.

5. Book Payroll, Draws and Owner Pay Consistently

Payroll and owner pay should follow the same pattern each month. Confirm that payroll expense and the related tax liabilities agree with the payroll reports, and that payroll tax deposits were made on time.

For owners, decide how pay is recorded and stick to it. A salary for a shareholder-employee is an expense. A draw or distribution is not. Mixing them up is one of the most common ways a firm's profit comes out wrong, and it carries over into the owner's tax return.

Check for the items that tend to slip: bonuses paid in the month, health insurance for owners, expense reimbursements and payments to contract attorneys, which may need to be tracked for year-end reporting.

The limitation: how owner pay should be treated depends on the firm's entity type and tax elections. A bookkeeper can record it consistently, but the choice of structure belongs to the owner and a tax professional.

6. Lock the Period and Keep a Law Firm Month-End Close Checklist

When the steps above are done, close the period in the accounting software so no one can change a prior month without leaving a trace. Then review a short set of reports: profit and loss, balance sheet, trust ledger summary and receivables aging. Read them once before anyone relies on them.

Write the checklist down, even if it has only eight lines, and date each month's copy. A checklist is what lets a firm hand the close to someone else, or survive a bookkeeper's vacation without a gap.

Legal Ease fits this part of the problem. It is based in Fort Worth, Texas, founded in 2016, with 12 employees, serving clients nationwide. Its live profile describes a law firm bookkeeping specialty and names SMB Owners, Solo and small law firms and Solopreneurs as specialties.

Legal Ease has 9 verified client reviews on Sam's List. Each review is submitted by an individual who identifies as a client of the firm and rates it on communication, subject-matter knowledge, and overall satisfaction. Reviews reflect those individual experiences and do not represent an endorsement by Sam's List. Legal Ease is a paying member of our featured program, and payment does not buy its reviews. Ratings and rankings are not indicative of future performance or results.

The limitation, plainly: the profile lists a $500,000 revenue minimum, so a smaller practice may fall outside what it takes on. It does not say which state bars' trust rules it works under, so ask which jurisdictions it has handled and who signs the monthly reconciliation.

Frequently Asked Questions

What is a law firm month-end close?

It is a monthly routine that reconciles bank accounts, confirms trust balances, reviews unbilled time and costs, ages receivables, checks payroll and owner pay, then locks the period. The result is reliable monthly financial statements for the firm.

How often should a law firm reconcile its trust account?

Many state bars require a three-way reconciliation, often monthly, comparing the bank balance, the firm's trust book balance and the total of the client ledgers. Your own bar's rules control, so check them directly and keep dated records.

What should a law firm review at month end besides the bank?

Unbilled time and costs, accounts receivable aging, payroll and payroll tax deposits, and how owner pay was recorded. Those four areas are common places for profit on paper to drift from cash.

How long should a law firm month-end close take?

For a small firm with clean records it can take a few hours. It takes longer when reconciliations were skipped. A written checklist and a consistent monthly schedule shorten it, and the sooner the close finishes, the more current the numbers are when you act on them.

Before the next close, write down the six steps above as a checklist and assign an owner to each. You can browse bookkeepers on Sam's List, including the firm above, and ask each one who signs the monthly trust reconciliation.

How We Chose This Firm

You should be able to check our work, so here is how this post was built.

The pool. The firm here is a vetted Sam's List member in our featured program with a live public profile that describes a law firm bookkeeping specialty. This is not a survey of every bookkeeper who serves law firms, and many Sam's List members not written up here could fit.

How it is organized. The six items are a sequence to work through, not a ranking. One firm is written up, so there is no order of firms.

What review counts mean here. We cite the firm's verified review count and its date from its profile. A count shows how many clients wrote something down. It does not measure technical quality.

What payment does and does not buy. Listing on Sam's List is free, and so is being named in this article. The firm written up here is a paying member of our featured program, which is why it gets a write-up. What payment does not buy is the language we use about a firm, its review count, or a promise that it fits you.

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About the author: Kimberly Green is the cofounder of Sam's List, where business owners and high earners find vetted CPAs, financial advisors, and fractional CFOs. She's met one-on-one with 400+ financial professionals and writes from the real data behind thousands of client-advisor matches. Ask her anything about finding an accountant - she's heard it all, including the questions people are afraid to ask.