The basic rule is simple: only transfer money from your IOLTA when fees are actually earned. The California State Bar is strict about this. Taking money before you’ve done the work is commingling, and that creates serious problems during audits.

Fees become earned when you complete the work. For hourly billing, that means the hours have been worked and billed. For flat fees, it depends on your fee agreement. Some flat fees are earned on receipt, others are earned in stages as work progresses. Your engagement letter should specify exactly when fees are considered earned.

Before you transfer anything, generate an invoice that shows what work was performed. This invoice is your documentation that the fees moved from unearned client funds to earned revenue. Without it, you have no paper trail proving the transfer was legitimate.

The actual transfer can happen by check or electronic transfer. Write a check from your IOLTA payable to your operating account, or initiate an ACH transfer if your bank allows it. Either way, include a memo referencing the client matter and invoice number. This creates a clear audit trail connecting the transfer to specific earned fees.

Record the transaction on both sides. In your trust accounting, the transfer reduces the client’s trust balance. In your operating account, it shows as revenue coming in. If you’re using Clio integrated with QuickBooks, this process can be streamlined so the invoice and payment flow correctly between systems. If you’re doing it manually, make sure both ledgers reflect the same amount on the same date.

Reconcile your IOLTA monthly. After transfers, the balance in trust for each client should match what they’ve deposited minus what you’ve transferred out. Law firm trust accounting requires three-way reconciliation: your bank statement, your trust ledger, and individual client balances all need to match perfectly.

Common mistakes to avoid: transferring before invoicing, rounding up transfers and fixing it later, and letting earned fees sit in trust too long. The first two create compliance issues. The third creates cash flow problems and makes reconciliation messy.

Keep copies of every invoice that justifies a transfer. If the State Bar audits your trust account, they’ll want to see that every dollar leaving IOLTA was properly earned and documented. Having organized records makes audits routine instead of stressful.

For attorneys in the San Gabriel Valley managing their own books, small business bookkeeping in Los Angeles that understands trust accounting requirements can prevent the errors that lead to State Bar issues. The mechanics of transferring earned fees aren’t complicated, but the compliance requirements demand consistent documentation and reconciliation.