Banking Your Law Firm

Thirty years ago, when I opened my law firm, I had no concept of the various services that banks offered to help law firms, and how your bank could prove to be a valued member of your team. In some ways, I was a bit intimidated by financial institutions. It wasn’t until some 15 years later, when I led an effort to charter a bank in our community, that I began to fully appreciate the variety of financial products that banks offer law firms, and how they can facilitate the law firm in achieving its financial goals.

Client Service Representative

Anytime a law firm embarks on establishing a relationship with a bank, it should also establish a relationship with its personal client service representative within the bank who will serve as its financial concierge, and advocate for the various financial products offered by the bank that may help your firm in achieving success.

Operating and Escrow Accounts

The fundamental two accounts for any law firm are its operating and escrow accounts. These accounts cannot be commingled and must be reconciled regularly. Your bank client service representative can help you establish these accounts, and with respect to your escrow account, assist the law firm in having it connected with your local IOLTA program, where interest on your account is paid regularly to your community’s IOLTA account to provide funds for law-related public service projects and programs designed to improve the administration of justice.

Reserve Accounts

Another account that can be critically important for a law firm is the reserve account, where funds are placed in short-term investments that can be easily accessed. Law firms should have enough cash in reserve to sustain three to six months of operations. Our firm came to know the value of reserve accounts in the wake of several hurricanes, as well as the recent COVID pandemic.

Streamline Payroll with Direct Deposit

In today’s fast-paced world, I cannot imagine cutting checks for payroll. Working with your bank and for a small fee, law firms simply fill out an online payroll form and monies are deposited in employees’ accounts. Think of all the time saved by implementing this service for your firm and its employees.

Lines of Credit

Often, law firms find themselves between feast and famine, particularly if they bill only once a month. One way to address this concern and to even out cash flow in your operating account is to establish a credit facility with your banka line of credit. A line of credit is a set amount of money that may be used by the firm as required. Although usually an annual fee is required to establish the line of credit, no interest is paid on the money until it is accessed.

Loans to Finance Office Space

In 2017, our firm experienced two back-to-back Category 4 hurricanes, Irma and Maria. Irma tore the roof off of one wing of our offices, where we had been located for over a quarter of a century. When the landlord refused to secure the rest of the law firm property, we knew we had to move. So with only days before the arrival of the second hurricane, we moved to the second floor of our bank. Yes, another service your bank can possibly provide. With the move, we had to adapt the space to accommodate the needs of the firm. In doing so, furniture and equipment needed to be purchased and the space renovated. With the help of a loan from our bank, we were able to make the transition with less effort.

Online Banking

Your bank should offer you 24/7 access to your accounts through the bank’s website, offering features such as viewing account balances, obtaining statements, checking recent transactions, transferring money between accounts, and making payments. Online banking also offers greater convenience to law firms in time savings, by not having to physically come to the bank and the ability to perform banking transactions even when the bank is closed.

Remote Deposit

Remote deposit allows the law firm to deposit checks into the firm’s accounts from the firm or a remote location without having to physically deposit the check with the bank. Usually, this is accomplished by scanning the image of the check and then emailing it to the bank. Many lawyers may simply use the camera and e-mail capability on their smart cell phones for this purpose.

Business Credit Cards

Law firm credit cards through your bank can offer a variety of conveniences, such as cash back for charges and detailing which attorney is charging to the account. Our firm utilizes several cards, some that are provided to the partners for client entertainment and travel expenses, and others that are used to pay various government expenses, such as taxes and fees.

Vault Services/Safety Deposit Boxes

Frequently, lawyers come by quite important documents or valuable personal property. While the firm may have its own safe to add that extra layer of security, it may be a good idea to secure a safety deposit box with your bank. Recently, our firm came into possession of a very large collection of jewelry and sterling silver from an estate. Our firm safe could not accommodate the volume, and we certainly did not want to leave such valuable property unsecured. Our bank allowed us to use their vault to house the silver and a safety deposit box for the jewelry.

Partner Capital Financing and Buyout Financing

As firms grow, often new partners come into the firm, and older partners leave or become “of counsel.” In these instances, you may need to call upon your bank to assist with a loan to the new partner or to the firm in the case of partner buyout. Again, this is an instance where your banker can offer you advice as to how best to structure the financing.

Fraud Protection

Law firms are finding themselves under attack from cybercriminals, ranging from phishing attacks by criminals posing as reputable companies or even the firm’s managing attorney, to hackers intercepting emails of clients or the firm, and then emailing the firm and providing fraudulent wiring information. Both of these criminal activities have recently happened at our firm. With the phishing expedition, our staff has been trained and knew to ignore the emails, but with the latter, a young associate did not realize the change in email addresses, which included a new client email address. Once the firm discovered the fraud, we went to our bank, who immediately contacted the receiving bank and requested return of the funds. We were one of the lucky firms and had all the funds returned a month or two later. In the meantime, we utilized our line of credit and reserve account to cover the wire to our client.

Your bank may offer additional services. You should make an effort to meet with your bank client representative to determine how the bank’s services can assist your firm in its financial goals. Selecting the best bank for your law firm is a lot like selecting the right candidate for a new associate position. Your bank should have the right attributes, services and abilities to facilitate your firm’s operations and financial goals and move your firm forward.

About the Author

Tom Bolt ( is founding partner of BoltNagi PC in St. Thomas, VI, is chair of the Law Practice Division’s Committee on Law Firm Finance, and is a former chair of the division.

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