Common Accounts Rules Breaches

It is important to remind yourself frequently about common breaches in the accounts rules. At The Cashroom we put policies and procedures in place for our clients to safe-guard them from breaching the rules, in this short piece we demonstrate the most commonly breached rules and advise on ways you and others in your firm can avoid these.

If funds are transferred between clients without the client’s written authority this is a breach, i.e. I am selling my flat and buying a house with a partner. As an individual I am selling a property, I am a singular client and must give written authority for the proceeds of my sale to be used in another matter, such as the purchase of a property jointly for my partner and me. For the purchase transaction my partner and I are dealt with as a joint client and matter. Therefore, my written authority is required to transfer the proceeds from the sale of my flat for the purchase of our house. (SRA Account Rule 20 and CLC Rule 12)

To avoid breaches-

  • Put a procedure in place to ensure confirmation that the mandate giving the client’s written authority for a transfer to another client is on file and obtain a partner/directors approval in the instruction to Cashroom to transfer the funds
  • Put a procedure in place to ensure confirmation that all bills have been issued to the clients on creation

A breach can take place when there is a withdrawal of client funds from a ledger where the current balance held for that client is lower than the actioned withdrawal. (SRA Accounts Rule 20.6 & CLC Rule 12). A client account must not be overdrawn.

To avoid breaches-

  • Ensure that before a payment is made/requested against the client account there are enough funds currently showing on the client side of the financial ledger to cover the withdrawal. If there are not sufficient funds on the client ledger you must not make the withdrawal.

There is a rule where a solicitor is not required to pay sums into the client a/c but must record such intermissions in the client ledger (SRA Account Rule 16 and CLC Rule 11).

To avoid breaches-

  • Ensure procedures are in place to log all incoming client cheques and log the outgoing details; of either by banking the cheque or endorsing the third party cheque direct to the client

Client balances held after the conclusion of a matter should be dealt with promptly. (SRA Account Rule 20 & CLC Rule 12.2.6) Any balance held after conclusion of the matter is a breach.

To avoid breaches-

  • Review all balances currently held when receiving your month end balance listings from your Cashroom; and ensure all finalised matters are checked for balances before archiving
  • Obtaining the client’s bank details upon opening a new client will avoid the need to search for clients’ in the future

Transfer of costs or disbursements from client account within 14 days of rendering the bill of costs or incurring the disbursement (SRA Account Rule 17); or within 28 days of completion (CLC Rule 12.1.4). Any funds still held in client account after 14/28 days is considered to be in breach.

To avoid breaches-

  • Your Cashroom can produce reports to highlight all matters with outstanding office balances and where funds are held in client account to identify any potential transfers
  • Ensure procedures are put in place for all transfers to be instructed to your Cashroom on payment of the bill or disbursement

The payment of billed professional disbursements should be made within 48 hours of receiving the funds in payment of your bill. If the professional disbursement has not been paid within this timeframe the funds are considered client monies and as such should be immediately transferred to the client account. (SRA Account Rule 17.1)

To avoid breaches-

  • Ensure procedures are in place to identify that when a bill has been paid by your client; instructions to make payment of all unpaid disbursements included on the bill are sent to your Cashroom.

If you would like any advice on compliance, a health check inspection carried out on your accounts or are thinking about outsourcing your cashiering function, management accounts function or payroll then please do not hesitate to contact [email protected] or visit www.thecashroom.co.uk for more information.

Cashroom

http://www.thecashroom.co.uk/

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The Cashroom Ltd exists to deal with the day to day administration of a law firm’s finance function, ensure compliance with the Solicitor’s Accounts Rules, and provide firms with management information and Management Accounts. We provide the time and the information allowing solicitors to focus on their business.

The Cashroom provides a specialist accounting service to the legal profession, comprising an outsourced legal cashiering service, and an outsourced management accounting service. We now do this for almost 150 clients in the UK. Our legal cashiering service is delivered remotely by a team of qualified cashiers, working in our offices. We use our client’s own practice management system (there is no need to change system), logging on remotely to run their cash room, as if we were in the room next door.

We also provide an outsource management accounting service delivering management accounts and management information to law firms quickly and economically, often to firms who could not afford to employ a full time accountant. More importantly, we work with clients to analyse that information, helping them understand their firm’s finances more clearly.

Lawyers are not accountants and employing, supervising and managing a cash room, was a worrying prospect for many solicitors. Our Legal Cashiering Service takes away that worry, running and managing a firm’s cash room, on an outsourced basis, and ensuring compliance with the Accounts Rules.

And we usually do it for around two thirds the cost of running an accounts function in house.

Few small to medium sized firms produce the management information they need to run their business effectively. Few produce monthly Management Accounts, few have annual budgets, and fewer still track performance against budget on a monthly basis.

Our Accountants combine “best practice” from a number of firms to create a finance function, which produces Management Accounts and management information quickly and efficiently. The Cashroom produces annual budgets, monthly management accounts, monthly management information and cash flow projections. More importantly, our Accountants spend time with our clients making sure they understand the information, and what it tells them about their business.

And, again, we do it for a fraction of the cost of employing a Finance Director.

We also run a full outsourced payroll including auto-enrolment services for firms of all sizes.

Key Contacts:

If you are regulated within the English and Welsh market then please contact:

Alex Holt
T: 07817 420 466
E:  [email protected]

English Office
The Cashroom, West Lancashire Investment Centre, White Moss Business Park, Maple View, Skelmersdale , Lancashire, WN8 9TG
Tel: 01695 550 950

If you are regulated by the Law Society of Scotland, please contact:

Gregor Angus
T: 07875 598 593
E: gregor.an[email protected]

Scottish Office, Livingston
The Cashroom, Craglea House, 7 Quarrywood Court, Livingston Village, Livingston, West Lothian. EH54 6AX
Tel: 01506 401 270

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