Handling NSF Trust Receipts in PCLaw

 

There are two main methods used to handle NSF trust receipts:

1. The NSF is returned by the bank within the trust account. This is a simpler method, but your trust account can end up becoming overdrawn. When using this method, be sure to have overdraft protection in place, to prevent your own trust account cheques from going NSF.
2. The other approach is to have the bank take the trust NSF funds from your general account. That way, you never have to worry about your trust account being overdraw or NSF trust cheques. You will still want to have overdraft protection on your general account.

If the these trust funds have not been distributed, and you are using Method 1 - simply Void/NSF the trust receipt.

If using Method 2, write a general cheque payable to your bank, enter the matter number, and in the explanation box add a note regarding the trust NSF. Bill the matter, and use the trust funds still on deposit in your trust account to pay this invoice – thereby reimbursing the general account.

When using either approach, problems will arise if the trust funds have already been distributed prior to your being notified of the NSF. If you try to just void the trust receipt, you will probably get a error message that the client’s trust ledger will be overdrawn.

When using either Method, do a General to Trust Transfer in PCLaw and deposit this cheque into your trust account.

If using Method 1, the client ledger will now have sufficient funds, so you can now Void/NSF the original trust receipt.

Using either Method, bill the client, and pay your invoice if there are any trust funds remaining.  The client will now have an accounts receivable balance equal to the funds that were distributed prior to the NSF.

As always, I invite your comments and suggestions for future post topics. Next week – Bank Errors and PCLaw.

Clyde