The problem: client ledgers should not consume your chart of accounts
QuickBooks Online Plus can record a personal injury settlement without creating an account or class for every case. The trust bank holds the pooled cash. Client Trust Liability records what is owed. The Customer field separates each client's share.
Plus permits 250 active chart-of-accounts entries across the company and 40 classes and locations combined. A liability sub-account per client uses those 250 slots alongside normal operating accounts. A class per case can exhaust 40 entries before a growing firm's reporting process is settled.
QuickBooks does not stop a payment that makes one client's trust balance negative. Staff must check the client's available collected funds, not only the pooled IOLTA balance. The same person can receive settlement funds and be paid as the client without a duplicate Vendor.
Set up the trust accounts and names
- Create the real IOLTA bank account in the chart of accounts. In QuickBooks Online, choose Bank and the Trust account detail type where available. Use a clear name such as IOLTA - Main. Keep operating funds in a separate bank account.
- Create Client Trust Liability as Other Current Liabilities. In Online, choose Trust Accounts - Liabilities where available. Desktop uses account types rather than the same Online detail-type menus. The total trust liability must equal the corresponding trust book bank balance.
- Create one Customer per client. Use a sub-customer, Project or Customer:Job for each matter when a client has multiple matters. Use the same client and matter identifier throughout the settlement.
- Create doctors, lien holders, referral attorneys and other third-party payees as Vendors. Pay the client's own share to the existing Customer on a Check or supported Expense form. Do not create a second Vendor record just to pay that client.
- Use Client Trust Liability on every trust deposit and payout line, with the correct Customer or matter on the line. Enable the Customer column where needed. The payment's header payee identifies the recipient; the line's Customer identifies whose money is being used.
- Load opening client balances from verified ledgers. Confirm that their sum equals the trust bank book balance. Do not invent an income deposit to make an opening difference disappear.
- Test one settlement before relying on the report. Record its deposit, doctor payment, client payment and earned-fee transfer. Confirm every trust line appears under the right client and that no client ledger goes below zero.
Plus settings to check before the first settlement
- In Settings, Chart of accounts, create the Bank / Trust account and Other Current Liabilities / Trust Accounts - Liabilities accounts. Use the available detail types in your US company file.
- In Account and settings, enable customer or project tracking on expenses if the Customer column is not visible. On the actual Check or Expense form, confirm the field is present in Category details. Do not mark a trust distribution as a billable firm expense simply to obtain the field.
- Create the client as a Customer, then a sub-customer or Project for each distinct matter if needed. Apply the same matter on the deposit and on every payout line.
- Restrict bank-feed automation that might categorize a settlement as income or omit its Customer. Match downloaded activity to the posted transaction instead of creating a duplicate.
Record a settlement, line by line
Record the settlement deposit and confirm the funds are collected and available before writing any check against it. A bank feed entry or provisional bank credit is not proof that the deposit has cleared. Follow applicable trust rules and bank confirmation requirements.
The example trust deposit is $100,000. The $15,000 doctor payment, $50,000 client share and $35,000 earned fee total $100,000. The separate $500 operating case cost does not reduce that trust ledger. If the settlement authorizes reimbursement of a prior case-cost advance, record that separately with accountant-approved treatment.
An earned-fee payment reduces trust liability. The operating-side receipt then recognizes earned income or settles an existing receivable. Do not use a bare bank-to-bank Transfer as the whole entry: it does not by itself reduce the client's liability or explain the fee. Do not recognize the fee twice.
The Customer column is an allocation field, not a second payee. Use the client or matter on each category line, including a check payable to a Vendor. Use a Check or supported Expense form for the client's payout if a bill-payment workflow requires a Vendor. Check the report after posting.
| Transaction | Screen and bank account | Payee / received from | Account on the line | Customer on the line |
|---|---|---|---|---|
| Settlement deposit: $100,000 | Bank Deposit / Make Deposits into IOLTA | The client's Customer record in Received from | Client Trust Liability | Client or matter; Received from supplies the deposit name |
| Doctor or lien holder: $15,000 | Check / Expense, or Write Checks, from IOLTA | Doctor or lien-holder Vendor | Client Trust Liability, not a firm expense | The client or matter whose funds are being used |
| Client's share: $50,000 | Check / supported Expense, or Write Checks, from IOLTA | The existing Customer, not a duplicate Vendor | Client Trust Liability | The same client or matter |
| Earned attorney fee: $35,000 | Check / Write Checks from IOLTA to the firm; record the operating receipt separately | The law firm / operating account | Client Trust Liability on the trust payment; earned fee income or receivable settlement on the operating side | The same client or matter on the trust line |
| Case cost from operating: $500 | Check / Expense, or Write Checks, from operating only | Court, expert or other Vendor | Client-cost advance asset or appropriate cost account under the accountant's policy, not Client Trust Liability | The client or matter receiving the cost |
How to see each client's balance
Run Transaction Detail by Account. Filter Account or Distribution Account to Client Trust Liability, including its sub-accounts if used. Group by Customer, show the Customer or Customer:Job column, and include the matter identifier. Report menus vary by version and reporting view.
Use all dates through the reporting cutoff, or include a verified opening balance. A subtotal over only this month's activity is a change in balance, not necessarily the amount still held. On a liability report, credits increase the amount held and debits reduce it; check the report's sign convention with your accountant.
Each client's ending subtotal is what the firm still holds for that client. Separate matters when required. Review blank or Not specified groups, investigate negative balances, and confirm the sum equals Client Trust Liability and the trust bank book balance. Save the report with its filters and date basis.
When Plus is enough, and when to consider Advanced
Customer-based trust tracking does not require a class per client. Keep classes for a small set of management categories, such as practice area, if the firm's reporting policy calls for them. Keep matters in Customer / Project instead.
Plus includes five billable users. Intuit lists accountant and certain reports-only or time-tracking users separately. Assess Advanced when you need more than five billable users, custom roles, or a genuine class-per-case policy beyond Plus limits.
Do not treat the upgrade as a trust-accounting control. Advanced still needs the same bank account, liability, client allocation and cleared-funds review. A higher list limit does not make a client's money available.
- Review active account, class and location counts before adding client sub-accounts.
- Do not delete or merge client history just to free a list slot. Review archiving and migration with the accountant.
- Retain a saved client-ledger report and a signed monthly reconciliation package.
A simple monthly close
Reconcile the IOLTA bank, compare the adjusted bank figure with the trust book balance, and total the client ledger report at the same date. Investigate every blank client allocation, outstanding check and negative client subtotal.
Keep the bank statement, outstanding-item list, client report and reviewer sign-off together. Trust rules vary by state. Confirm your bar's record-keeping and reconciliation requirements rather than relying on the software's defaults.