Avoidable Horror Stories: What Every Lawyer Should Know About Their Firm’s Accounting

Running a law firm is demanding enough without unexpected financial “surprises” lurking beneath the surface. Yet every week, attorneys come to us with issues that started small - an overlooked payroll setting, a mismarked trust account, a billing mistake - and grew quietly into full-blown crises.

At The Proper Trust, we’ve seen just about everything. And while we share these stories with deep empathy, each one offers a lesson every law firm should take to heart.

When Payroll Goes Sideways

One of the most common surprises we see involves payroll setups gone wrong: S-Corp owners not marked correctly, health insurance misclassified, retirement plans mismatched, or cafeteria plans handled improperly.

Sometimes the mistake dates back years and wasn’t caught because bookkeeping was handled by someone “good with numbers” but not trained in legal-specific compliance. Attorneys assume payroll platforms handle everything automatically. Payroll platforms assume attorneys know what to tell them. And in the middle of that gap, a quiet mess begins to grow.

These aren’t minor issues. Missteps can lead to amended filings, tax exposure, penalties, and expensive clean-up projects.

Trust Accounting: Where the Stakes Are Highest

If there is one area where small mistakes turn into career-changing consequences, it's trust accounting.

We’ve seen:

• Trust accounts set up as regular checking accounts

• Net transfers used to “estimate” billing before bills were run

• Client overpayments buried inside lump deposits

• Trust shortages that went unnoticed for months

• Thousands of dollars in uncashed trust checks left unresolved

These scenarios aren’t theoretical. They’re real. And they put attorneys at risk of discipline, sanctions, or worse. And yet, most began with simple misunderstandings: a paralegal handling billing without training, a receptionist filling in, or an owner trying to juggle too much.

The truth is simple: you can’t afford to guess with trust accounting. Your license depends on it.

When Billing Software Becomes a Minefield

A surprising number of law firms come to us convinced their billing software is “broken.”
More often, the software is working, it's just been set up incorrectly or left unmonitored.

We’ve untangled everything from:

• Revenue disappearing because invoices weren’t posted correctly

• Payments moved into the wrong accounts

• Trust deposits mislabeled as operating revenue

• Bills run without understanding the flow of funds

Legal billing platforms are powerful when configured correctly. But if the wrong person gets access or the right person doesn’t get training, it creates a domino effect through the entire financial system.

The Hidden Risks in Employee Handbooks and HR Policies

Many lawyers are surprised to learn how often their employee handbook contradicts their payroll settings, or state regulations.

We’ve seen handbooks that:

• Haven’t been updated in 20–30 years

• Promise benefits the payroll system isn’t tracking

• Miss state-specific requirements around leave, overtime, or protected absences

One employee complaint is all it takes to turn a quiet inconsistency into a legal issue.

The Growing Threat of Fraud

Fraud is increasing across every industry, and law firms are prime targets. We’ve seen:

• Emails spoofed to look like the managing partner

• Fake police calls leveraging local jurisdiction details

• Scam invoices requesting urgent payment

• Messages designed to mimic a staff member’s voice or writing style

Even the savviest professionals can be caught off guard. That’s why layered security - multi-factor authentication, internal controls, payment protocols, and regular training - is no longer optional. It’s essential.

Owning the Problem Is the First Step to Solving It

Mistakes happen. Even the best attorneys - detail-oriented, client-focused, highly trained - can be blindsided by accounting complexities.

What matters is how you respond.

If something feels off…
If you’re unsure whether your trust account is set up correctly…
If your billing software doesn’t “look right”…
If payroll has never been audited…

…those are signs to bring in a specialist before the issue grows.

If Parts of This Sound Familiar…

You are far from alone. Nearly every law firm we meet has a story: a billing tangle, a trust accounting surprise, a payroll wrinkle, or a scam attempt that nearly slipped through.

The good news?
Every one of these problems is fixable with the right support.

If you’re ready to protect your firm, clean up your systems, or get proactive about compliance, we’re here to help.