What 'Three-Way Reconciliation' Means and Why Law Firms Can't Skip It
Sam's List Editorial | 2026-06-23
What 'Three-Way Reconciliation' Means and Why Law Firms Can't Skip It The fastest way for a lawyer to lose a license isn't losing a case. It's a trust account that doesn't balance. Featured firm Legal Ease Bookkeeping Brandy Derrick runs Legal Ease Bookkeeping — a Sam's List bookkeeper focused on law firms and property managers. Trust accounting, IOLTA compliance, three-way reconciliations, and owner statements that hold up under a bar or state audit. View profile on Sam's List → “They have made my life a lot easier. For attorneys, managing multiple accounts and especially an IOLTA trust account can be a lot of work. Working with Brandy and her team, it is easy to keep everything straight — every dollar that comes through my accounts is organized and accounted for every week.” — Andrew Deegan · ★★★★★ · Read on Sam's List Most firms think they're covered because the bank statement matches the books. It isn't enough. The discipline that actually protects your bar card — and your clients' money — is a three-way reconciliation, and a lot of law firms either do it wrong or don't do it at all. Here's what that actually means, and why "we reconcile the bank" is one of the most dangerous sentences in legal accounting. Three-way reconciliation for a law firm matches three numbers, not two A standard business reconciliation compares two figures: what the bank says you have, and what your books say you have. That's a two-way reconciliation, and for your operating account it's fine. A trust account is different. You're not holding your own money — you're holding money that belongs to many separate clients, pooled into one IOLTA account. So a three-way reconciliation for a law firm checks three numbers against each other, every month: The trust bank statement balance — what the bank says is in the account. The trust ledger balance — your firm's running record of the whole account. The total of every individual client ledger — every client's balance, added up. When all three agree to the penny, every dollar in that account is accounted for, and you can name the client who owns each one. When they don't, somebody's money is in the wrong place. That's the whole point. Why matching the bank isn't enough — and where commingling hides This is the part most firms miss. The bank balance can match your book balance perfectly while a client's funds are quietly missing. Say your IOLTA account holds $50,000. The bank says $50,000. Your trust ledger says $50,000. Two-way reconciliation: clean. Looks great. But add up...
