Adapted by Peggy Gruenke – Originally Published in Attorney at Work

As an attorney, you have a responsibility to uphold the highest ethical standards in your work. This includes how you handle your clients’ money. There are numerous financial ethics traps that law firms can fall into, and it’s important to be aware of them to avoid them.

Charging unreasonable fees

ABA Model Rule 1.5(b) states that lawyers’ fees must be reasonable. This means that they must be fair and proportionate to the services provided. There are a number of factors that can be considered when determining whether a fee is reasonable, such as the complexity of the case, the amount of time and effort involved, and the lawyer’s experience and expertise.

It’s important to be transparent with clients about your fees and to get their consent before you begin work. You should also be prepared to justify your fees if a client challenges them.

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Failing to disclose credit card fees

When you accept credit card payments from clients, you are typically responsible for paying a processing fee. If you pass this fee along to clients, you must disclose these fees to clients in advance. It is also important to keep an eye on these fees, as they may change from time to time. You can’t charge them more than the actual cost of the processing.

Failing to keep accurate records

Good recordkeeping is essential for any law firm, but it’s especially important when it comes to financial matters. You need to keep accurate records of your fees, expenses, and trust account transactions. This will help you to avoid errors and to comply with ethical requirements.

Inaccurate data 

Inaccurate data can lead to several problems, including overbilling clients and underpaying expenses. It’s important to have a system in place for ensuring that your billing and accounting data is accurate.

Mismanaging trust accounts

And last but never least – trust funds. It’s important to keep these funds separate from your firm’s operating accounts and to use them only for the purposes for which they were intended.

Some common mistakes that law firms make with trust accounts include:

  • Overdrawing the account
  • Commingling funds from different clients
  • Using trust funds to pay for firm expenses

Call to Action!

You are responsible for your firm finances. If you haven’t checked on these five traps, take an hour in the next week to review with your team.

Here are some additional tips for avoiding financial ethics traps:

  • Automate your client onboarding and be sure to have up to date contracts for clients to sign.
  • Use a billing and accounting system that helps you to track your fees, expenses, and trust account transactions.
  • Reconcile your accounts regularly – every month!
  • Have a system in place for disclosing credit card fees to clients.
  • Train your staff in financial ethics standards.

By following these tips, you can help to ensure that your law firm is following financial ethics standards and that you are protecting your clients’ interests.