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How solo and small firms can avoid banking headaches

Heather Abissi Author : Heather Abissi | March 27, 2024

West coast litigators, east coast personal injury attorneys—no matter the geographic location or practice area—a lot of attorneys get red in the face when asked about their banking experience.

With solo practitioners and small law firms in particular, these frustrations can be exacerbated because the attorneys already have so much on their plates. Sure, they spend most of their time practicing law, but they often play the role of CFO, marketer, tech support, and customer service as well.

It goes without saying - attorneys are busy people. Time is literally money when you think of billable hours. So, is it surprising that banking headaches can sometimes take a backseat to more urgent issues?

Well, rest-assured, some of the most common mistakes can be easily avoided by following a few best practices.


Headache #1: “I’m too small for a dedicated banker…

This is one of the most common lines we’ve heard from solo practitioners and small law firms, especially new law firms. Sure, you may not know your bank’s CEO or regional president on a first name basis, but you should know your banker and more importantly, your banker should know you!

If you think of yourself as “just another number,” you’re wrong. Banks should love attorneys as clients. Law firms typically hold higher deposit balances, are stable clients, and the attorneys are often connected to other working professionals (other attorneys, accountants, community figures, etc.). If you don’t feel that appreciation for your banking relationships that’s a problem.


Best Practice: Choose a bank where you can build a personal relationship with your banker – it’s good to have an advocate and partner within the organization!

When you have a personal relationship with your banker, everything is easier. You’re not calling a 1-800 number only to be put on hold. You’re not being asked to explain your relationship. You’re dealing with someone who knows you and wants to help you.


Headache #2: “My banker doesn’t understand how my firm operates…”

We’ve spoken with numerous attorneys who have a dedicated banker, which is great! However, their dedicated banker doesn’t understand their firm, which can be a headache.

Some bankers may think an attorney is an attorney is an attorney, but we know this isn’t the case. A personal injury firm using contingency billing to collect settlements from insurance companies will operate very differently from a flat-fee real estate attorney specializing in residential home closings.

It’s important that your banker understands how you operate so you can operate efficiently. And, you want to make sure your banker won’t push products you don’t need!

  1. “No, I won’t be needing credit card processing, we operate on contingency fees.”

  2. “No, that deposit is not fraudulent – it’s a lump sum settlement from a case we won.”

  3. “Yes, this check volume is normal – we cut 5-7 checks at every loan closing.”

Best Practice: Make sure your banker has experience with attorneys before you start a relationship!

 When you are dealing with a banker that understands how your firm operates, conversations are easier, and you spend less time educating them. If you think finding this type of banker is like finding a needle in a haystack, here’s an easy tip: ask an attorney colleague if they’d recommend their banker!



Headache #3: “My bank doesn’t help my firm grow”

This headache, while common, is not universal because not every small law firm expects their bank to help them grow. Sure, they may ask for the occasional loan or line of credit, but some attorneys are simply looking for a transactional relationship with a convenient bank that can hold their deposits. This may be a mistake.

Many solo practitioners and small law firms have attorneys playing multiple roles. Using your bank is a very easy way to decrease the amount of time you spend wearing your “marketing” hat! Referrals are huge in banking, so you simply need to ask:

  1. “Do you work with any local attorneys or professionals? Would you be willing to facilitate an introduction?”

  2. “I’d like for you to help set up a meeting between you [banker], me [attorney], and a client of yours in [target industry]. Is this something you may be able to help with?”

  3. “Are you attending any events this month? I’m always looking to build connections and was hoping you might be able to connect me with a few of your contacts?”

Best Practice: Ask for referrals and introductions – and give referrals too!

Here’s where Best Practice #1 comes back into play—building a personal relationship with your banker makes it easier to ask for referrals and give referrals. Many bankers are not shy about asking for referrals, and you should be doing the same to help build your network and grow your firm! Sending referrals to your banker is also a best practice because the referral is often reciprocated.


Headache #4: “Online Banking”

If 2020 has proven anything, it is that the ability to open a bank account and conduct the necessary banking functions to run your business online, without having to go to a branch or interact face-to-face with someone, is absolutely critical.

Yet, as law firms are all too aware, online capabilities for opening and managing your IOLTA account is all too rare. Account opening, checking your balance, viewing your monthly statement, transferring funds from IOLTA to operating account - all these activities are critical to your day-to-day operation. Unfortunately, a lot of them remain anchored in paper-based processes.

This headache may be the most current and universal of all. Nobody likes having to go to a branch when they don’t have to, but it goes without saying that when you charge by the hour, that type of inconvenience can add up.

Are you scratching your head wondering how it can be 2022 and it’s easier to order a pizza on your phone with a click of a button than finding the current balance of your IOLTA?

For attorneys, this best practice should be easy…


Best Practice: Do your research and don’t settle!

As that great philosopher from the 1980’s Ferris Bueller once said: “Life moves pretty fast, if you don’t stop and look around once in a while, you could miss it.” Technology moves quickly, even in the banking world. While you’ve been busy running your firm and growing your business, digital banking capabilities have grown by leaps and bounds. Make sure you’re not stuck with a bank solution that’s been left behind!

A bank that has joined the 21st century will offer the ability to open your account without having to spend time in a branch. Your bank should be familiar with the IOLTA account opening process and be able to set up a new account for you and your firm in a timely manner without referring you to an anonymous call center line or leaving you to fend for yourself determining the required documentation.

Your bank should offer the ability to:

  1. View your IOLTA account online and check your balance any time. This is the most basic capability you will need to stay on top of your IOLTA management.

  2. Quickly and easily transfer funds between your IOLTA account and your operating account online, a critical function of money movement for managing your client matters.

Those are the table stakes for not settling. Now if you’re saying to yourself, you expect more than just average, great, read on.

A good bank should allow you to configure online banking access to enable your staff or bookkeepers to perform parts of your IOLTA management process. This will allow the right level of access and provide the security and audit trail you should expect in order to feel secure in your process.

Finally, a good bank should understand your responsibilities in managing client funds in an IOLTA and provide the integrations to other key programs and software you use for accounting and payments to manage the operations of your firm. The key is to do your research. Just because your current bank is stuck in the last century doesn’t mean you have to be!


Online Banking (2)


Headache #5: “My bank doesn’t know much about my IOLTA account…”

Last, but not least - not knowing much about the IOLTA account can make it challenging to get the support you need. Whether it is multiple transfers through a call center to get to the right “specialist” or having to find that specific out-of-the-way branch that knows how to open them, finding readily available banking expertise in opening and servicing IOLTAs can be difficult. As all attorneys know (and all bankers should know), this is not your average checking account. IOLTAs, or Interest on Lawyers Trust Accounts, are accounts that are used to hold unearned funds on behalf of clients. These funds are held separately from the attorney’s funds and commingling these funds or mismanaging client funds can lead to serious ramifications for attorneys, including disciplinary action such as suspension from practicing law or even disbarment.


Best Practice: Make sure your banker understands the importance of IOLTA!

This best practice is linked to Best Practice #2 above, but due to the severity of the consequences related to IOLTA mismanagement, deserves to be a stand-alone best practice. Your banker might have connections with other attorneys, but it’s absolutely critical that the person responsible for setting up your account and/or managing your account relationship has experience with IOLTAs and understands the importance of IOLTA accounts. You do NOT want to be someone’s first IOLTA account opened. It’s not worth the risk!

Do these headaches resonate?

If you’re a solo practitioner or small law firm and these headaches resonate, perhaps it’s time to ask yourself, “what am I getting out of my banking relationship?”.  If you’re considering other options, a good place to start is with trusted colleagues. What do they like about their bank? Hopefully, they don’t have the same headaches listed above.


Additional Reading

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