Accounting for Attorneys

If you’ve ever looked at your firm’s financials and wondered, “Is this money actually ours to spend?”—you’re not alone.

Retainers are one of the most misunderstood (and most risky) areas of law firm finances. While they may seem straightforward on the surface, how retainers are handled can directly impact compliance, cash flow, and even your ability to return client funds when required.

Understanding the difference between trust retainers and operating (accounts receivable) retainers is essential—not just for your bookkeeper, but for you as a firm owner.

Why Retainers Matter More Than You Think

At year-end (or during a cleanup), retainers tend to reveal the cracks in a firm’s financial systems. Money that looks fine month-to-month can suddenly raise questions like:

• Who does this money belong to?

• Has it actually been earned?

• Could we refund it today if we had to?

• Why doesn’t this balance match what’s in the bank?

These aren’t academic questions. They affe...