Client & Trust Accounts: Keeping Client Money Beyond Question
Money a firm holds on behalf of clients is not the firm's money, and proving that at any moment is a professional obligation — not a bookkeeping preference. Here is what proper segregation of client and trust funds actually requires.
Many professional firms hold money that is not theirs: a law firm holding client funds pending a transaction, a consultancy holding money advanced for disbursements, an agency holding funds on behalf of a principal. The rule governing that money is simple to state and unforgiving in practice — it must be kept provably separate from the firm's own funds, and the firm must be able to demonstrate, at any moment, exactly whose money is whose. Most breaches of that rule are not fraud. They are the slow accumulation of small sloppinesses in a system never designed to keep the two apart.
Segregation is a record, not just an account
Firms often believe that a separate client bank account is the whole of the obligation. It is the start, not the end. Segregation is really about the record: knowing, per client, how much of the pooled client money belongs to them, what came in, what went out, and on whose instruction. A single client account holding money for forty clients is compliant only if you can instantly show each client's individual balance and reconstruct every movement. Without that ledger, the bank account is one number hiding forty positions — and the moment a client asks for their balance or a regulator asks for proof, the absence shows.
How commingling actually happens
The dangerous cases are mundane. A disbursement for client A is paid, in a hurry, from the firm's operating account and never reimbursed from the client ledger. Interest earned on the pooled account is left ambiguous. A client's funds are used — even briefly, even innocently — to cover a firm shortfall over a weekend, on the assumption it will be topped up. Each is a breach, and each is invisible until a reconciliation that never quite happens is finally demanded. The defense is not vigilance; it is a system where client-money movements are structurally separate from firm-money movements and every one is attributed to a person and a reason.
What defensible fund segregation requires
- Per-client balances within the pooled client funds, always current — not derived at year-end.
- Every receipt and disbursement of client money attributed to a person, a client, and a timestamp.
- Client-money transactions kept structurally distinct from the firm's operating transactions.
- Reconciliation of the client ledger to the client bank account on a fixed rhythm, not on demand.
- An audit trail that reconstructs any movement without relying on one person's memory or spreadsheet.
This is the same discipline donors demand of NGOs
Firms sometimes imagine client-fund segregation is a uniquely legal problem, but it is structurally identical to how NGOs must track restricted donor funds: money received for a specific purpose or party, kept separate from general funds, with every movement traceable to its source and sanction. The mechanism that solves one solves the other — funds tagged and segregated at the point of entry, movements attributed, positions always current. It is fund accounting, and it is exactly what a general-purpose bookkeeping setup does worst.
The test to run today
Ask your finance function for the current balance held for a single named client, and how long it takes to produce the full history of that client's money. If the answer involves opening a spreadsheet only one person maintains, or reconstructing from bank statements, your segregation exists on paper but not in practice — and that gap is precisely what an adverse audit finding is made of.
Proper segregation is not a burden a firm carries reluctantly; it is a protection. When client money is tracked as its own attributed, segregated position, the firm can answer the hardest question a regulator asks — instantly and completely — and the partners can sleep knowing the one mistake that ends professional careers is structurally prevented rather than merely hoped against.
What AWRA OpsHub does today
- Projects per client or engagement with budgets and coded costs, useful for your money.
- Customer records, invoices, payments and AR aging for billing your own fees.
- A consolidated payments register and full audit logging with named actors.
- Role-based permissions limiting who can record or view financial records.
More we can add to your workspace
- A trust or client account entity: a client-held balance, a trust ledger and separate books for client money.
- Segregation enforcement. A distinction between client money and firm money, with a block on the two mixing.
- A per-client balance of funds held, and therefore no client statement of that balance.
- Three-way trust reconciliation — which starts with bank reconciliation, itself on this list.
- Unclaimed-funds handling and no statutory trust reporting.
Everything the original version of this page promised — segregated funds, live per-client balances, auditor-verifiable segregation — is a build rather than a setting, and this correction is deliberately blunt because the obligation involved is a statutory one. If you hold client money today, buy dedicated trust accounting software or use your accounting package's trust module; we should not be part of that conversation. We are useful for the firm's own operations alongside it, and that is the whole of the claim.
Anything above that you need, we can build for you
Everything listed above as something we can add describes what ships in the standard product today — it is a starting point, not a limit on what AWRA OpsHub can do for your organisation. Kenya's eTIMS integration and its maintained payroll engine are both in the product because clients needed them and commissioned them; neither appeared by itself, and the same door is open for whatever you just read about. One qualification so this is worth what it claims: a small number of things on this blog we deliberately leave to a specialist rather than build — a statutory ledger we will not sign our name to, a rule that would decide a tax question for you, a clinical or member-funds record that belongs in a regulated system — and where that is true the post says so in those words. Everything else is a scope, a timeline and a price.
The operational work, which is what most commissions actually are
An extra approval stage in a chain that does not match the standard one, a custom field set on employees or assets that only your sector needs, an expiry that has to block an order rather than send an email, a report your board asks for in a shape nothing produces, or a scanner or weighbridge feeding the goods-in door. These are the commissions we are asked for most often and the smallest ones we quote — and unlike a revenue-authority pipeline, none of them waits on a regulator.
The module-shaped additions, which are the ones readers ask for most often
A price list with real discount authority, a customer-facing quotation that expires, a bill of materials or recipe costing, a staff advance that is issued, acquitted and chased, a member or unit ledger, a matching rule that holds a payment. Each of these is a build rather than a setting, and each has been quoted before — a bigger piece of work than a custom field, with a written spec and a date instead of a roadmap slide.
The report, document or pack nothing currently produces
The board pack in the shape your board actually asks for, a donor or funder layout, an invoice or receipt template carrying what your regulator or your customer expects, a dataset the report builder cannot reach yet. Usually the fastest thing on this list to deliver, because the data is already in the system.
Systems, rails and hardware you already run
The accounting package, CRM, online store, core banking or custom database you intend to keep — connected through our API so a fact is entered once and appears everywhere it is needed. Plus the physical edge: a scanner, a scale, a weighbridge or a till peripheral feeding the door it belongs to.
How it works: you describe the requirement, we return a written scope, timeline and cost, and once agreed it is built into your environment and maintained as part of the product. Nothing here waits on a regulator or a published specification, which is why operational builds are the ones we quote fastest. Tell us the requirement that would otherwise rule us out — that is a better first conversation than a demo.
Tell us what your operation needsKeep client money beyond question
Projects per engagement, fee invoicing with AR aging, and a full audit trail — for the firm's own money, which is not client money.
Explore professional-services operationsFrequently asked questions
Is a separate client bank account enough for fund segregation?
No — it is necessary but not sufficient. A pooled client account holding money for many clients is only compliant if you can show each client's individual balance and reconstruct every movement on demand. Segregation is fundamentally about the per-client ledger and attribution, not just the existence of a separate account.
How does commingling of client and firm money usually happen?
Rarely through fraud — usually through sloppiness: a client disbursement paid from the operating account and never reimbursed, ambiguous handling of interest, or client funds briefly covering a firm shortfall on the assumption of a top-up. Each is a breach that stays invisible until a reconciliation that never quite happens is finally demanded.
What does an auditor or regulator actually ask for?
Proof that client money was never commingled with the firm's — specifically, current per-client balances and the full, attributed history of every movement of client funds. A live per-client ledger reconciled to the bank account on a fixed rhythm answers this in minutes; a spreadsheet maintained by one person does not.
How is this related to NGO donor fund tracking?
It is structurally the same discipline: money received for a specific purpose or party, kept segregated from general funds, with every movement traceable to its source and authorization. Whether it is called client funds, trust money, or restricted donor funds, the solution is fund accounting — tagging and segregating at entry and attributing every movement.
