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Applying Trust Funds to Invoices in LeanLaw

How to pay client invoices from their trust account in LeanLaw — including the Pay from Trust workflow, the QuickBooks journal entries created, user permissions required, and how to undo a trust payment.

When a client has funds in their trust/IOLTA account, you can apply those funds directly to their outstanding invoices from within LeanLaw. The payment is recorded in both LeanLaw and QuickBooks Online automatically, with the appropriate journal entries created for compliance.

📋 Trust accounting must be set up: Pay from Trust requires trust accounting to be configured in LeanLaw (Settings → Trust Accounting) and a connected QuickBooks trust account.

 

User Permissions for Trust Payments

Not all LeanLaw users can apply trust payments to invoices. User permissions control this:

  • Principals and Operators can apply trust funds by default.
  • Timekeepers and other roles may have trust payment permissions disabled — check Settings → Users → [user] → Advanced tab if a user cannot see the Pay from Trust option.

📋 Note: If a paralegal or attorney needs to process trust payments, an administrator must enable trust fund payment permissions on their user profile in Settings → Users.

 

Pay from Trust via Manage Invoices

  1. Go to Billing → Manage Invoices.
  2. Find the invoice for the client with available trust funds.
  3. Click the three-dot menu (⋮) next to the invoice and select Pay from Trust.
  4. Verify the amount, date, and memo in the payment window.
  5. Click Pay from Trust to complete the payment.

📋 Pay from Trust only available when trust funds exist: 'Pay from Trust' only appears in the three-dot menu if the client has a trust account on record. If you don't see the option, check that the client or matter has a trust account set up.

You can also use checkboxes to select multiple invoices for the same client and pay all of them from trust at once.

 

What Happens in QuickBooks When You Pay from Trust

When a trust payment is recorded in LeanLaw, three journal entries are automatically created in QuickBooks Online:

QuickBooks Online Entry

Purpose

Debit: Funds Held in Trust (sub-account)

Decreases the client's trust liability balance — reflecting that funds have left the trust account.

Credit: Trust / IOLTA Bank Account

Decreases the trust bank account balance — the funds are moving out.

Debit: Operating Account

The funds arrive in the firm's operating account as payment for the invoice.

 

📋 Accrual vs. cash reporting: If your firm uses accrual-based reporting in QuickBooks Online, the invoice will show as revenue when created. If cash-based, it shows as revenue when paid. Either way, the trust payment entries are the same.

 

Undoing a Trust Payment

If a trust payment was recorded in error, it must be reversed in QuickBooks Online — not in LeanLaw directly:

  1. In QuickBooks Online, go to Settings (⚙) → Chart of Accounts.
  2. Open the View Register for the Operating (Checking) account.
  3. Locate the trust payment transaction and click Delete. Confirm with OK.
  4. Open the View Register for the Trust Liability account (typically named after the client or matter).
  5. Locate and delete the corresponding trust liability transaction.
  6. Return to LeanLaw and refresh. The invoice will show as unpaid and can be sent back to Draft if edits are needed.

⚠️ Already disbursed funds: If funds have already been moved from the trust account to the operating account (e.g., as a check was written), you may need to reverse the payment or manually adjust both accounts in QuickBooks Online. Consult your accountant before reversing a trust payment if funds have already been disbursed.