How do I apply trust funds a client already has on deposit to their invoice?

Applying trust funds to an invoice moves money your firm holds in trust, already earned, out of the trust liability and onto the bill as payment. It covers only the earned amount; if the invoice exceeds the trust balance, the difference is still due.

What “pay from trust” actually moves

A retainer sitting in a client trust account becomes your firm’s money only once it’s earned. Until then it’s a liability: funds you’re holding on the client’s behalf until the work that earns them has been done. Applying trust funds to an invoice is the accounting event that reclassifies that liability. Two things move together — the trust balance the client is owed goes down, and the amount they owe on the invoice goes down by the same figure. Nothing about that sequence is optional or firm-specific; it’s what a trust liability account is for.

Where this gets confused is with unrelated deposits. A single client can have more than one thing on deposit — an evergreen retainer, a cost advance, a settlement holdback — and only the portion tied to work actually performed on that specific matter is eligible to move. LeanLaw records that movement and keeps the ledger in sync with QuickBooks Online, but deciding which dollars are eligible to move is a determination your engagement letter and your jurisdiction’s rules make, not one software makes for you.

What happens when the trust balance doesn’t cover the whole bill

This is the part worth answering honestly. A $4,000 invoice against a $2,500 trust balance doesn’t resolve itself: $2,500 comes out of trust, and $1,500 remains an open receivable, collected the way any other unpaid invoice is collected. Some firms treat that gap as a signal to request a retainer top-up before it recurs; others let it run through normal accounts-receivable follow-up. Neither is a software setting. It’s a firm policy about how tightly retainers are managed relative to the pace of work, and it’s worth deciding on paper before the first partial-coverage invoice shows up. Seeing that balance clearly, matter by matter, is also what makes the decision possible in the first place — see running a report on one client’s trust activity.

Whose rules govern the timing

Trust accounting rules — what counts as earned, how quickly earned funds must move out of trust, what records the transfer requires — come from your state bar or governing jurisdiction, not from any vendor. They vary by jurisdiction, and in most, they leave real judgment to the attorney: exactly when a flat fee is “earned enough” to bill, for instance, is rarely spelled out to the dollar.

No software certifies that a given transfer satisfies your bar’s trust accounting rules, and none should claim to. LeanLaw records the movement of funds you’ve already determined are earned; it doesn’t move money at a bank, and it doesn’t decide, on your behalf, when a dollar has crossed from unearned to earned. That determination is yours, made under your jurisdiction’s rules, matter by matter — the same way it would be if you were keeping the books by hand.

What this depends on

• Your jurisdiction’s trust accounting rules for what counts as “earned” and how quickly earned funds must move.
• Whether your engagement letter treats a retainer as a single balance or requires replenishment above a set floor.
• Whether the matter is billed hourly, flat fee, or contingent, since that changes what “earned” means in the first place.
• Who reconciles trust in your firm, and how often, since timing discipline depends on that cadence as much as on the rule itself.

Related questions

Say the retainer has been earned and you want to move it out of the IOLTA account to pay the invoice — how does that work? The mechanism is the same however it’s phrased: earned funds move out of the trust liability and satisfy the invoice, up to whatever portion is actually earned. The judgment call — whether the work has reached the point of being earned — sits with the attorney and the jurisdiction’s rules, not with the ledger.

What if I keep money in a trust account that I pull from to apply to a bill for work done? That’s the standard pattern: a trust balance funds bills as work is completed and earned, rather than one deposit per invoice. What varies firm to firm is how the balance gets replenished once it runs low, which is worth deciding before it happens rather than after.