Easing The SRA Accounts Rules Administrative Burden

Easing The SRA Accounts Rules Administrative Burden

Earlier this year, the Solicitors Regulation Authority (SRA) released the changes to their Accounts Rules which will come into force from November 25th, 2019.

The SRA’s new Standards and Regulations will replace their current Handbook. They have been promoted as offering a less prescriptive set of regulations offering solicitors greater freedoms in interpreting the standards and how they should be enforced.

In April, the SRA’s Residential Conveyancing and Thematic Review was highly critical of the discrepancy between an initial quote and final conveyancing transaction costs.

Over a third (34%) of observed quotes failed to include costs and fees that should have been anticipated by the solicitor and ultimately added to the original quote.

The report found that additional fees were charged for administering gifted deposits, processing bank transfers and even for electronic ID verification. It was claimed that many of these fees were foreseeable, integral and a compulsory part of the conveyancing/home buying process.

Although firms may only quote for the actual conveyancing service and legal fees, when home buyers are already stretched, the SRA argued that fees like this should have been clearly referenced and included in the initial quote.    

The new standards and regulations reflect this issue and ensure the client is fully informed before financial decisions, affecting them, are made by the firm.

Although the Accounts Rules have decreased from 52 rules to 13 considerations, SRA regulated firms need to remain up to date regarding their obligations following the significant changes that will take effect this winter.

Important Changes to the Rules  

Providing a Bill of Costs Before Transferring Money

Currently, law firms may transfer money for disbursements they are owed from fees and searches in order to reimburse a firm for the loss they have incurred.

However, 4.3 of the Accounts Rules will prohibit a law firm from making a client account withdrawal without first notifying a client. The rule states:

4.3 Where you are holding client money and some or all of that money will be used to pay your costs:

a)      you must give a bill of costs, or other written notification of the costs incurred, to the client or the paying party;

b)      this must be done before you transfer any client money from a client account to make the payment; and

c)       any such payment must be for the specific sum identified in the bill of costs, or other written notification of the costs incurred,

Solicitors will now need to provide a clear bill of all costs, including any disbursements which will be included as costs during this process. Law firms will need to be organised and transparent with the fees and disbursements they may charge to avoid conflict.

Law firms will also need to ensure they have a specific figure in order to comply with Section C. It will, therefore, become essential for law firms to become a lot more specific about the costs, fees and disbursements which could affect the overall total.

Records, Audit Trails and Regularly Updated Balance Statements

Accounts Rules 8.1 – 8.4 highlight the responsibility of a law firm to keep accurate and constantly up to date records of the finances held in a client account.

The real obstacle for law firms here involves the obvious time implications that such a burdensome, labour intensive process will create. The rules involve meticulous organisation and consistent updating of client account information.

8.1 (a) asserts that all records must be accurate, relevant to the present time period and placed in chronological sequence. All receipts and payments need to be clearly displayed; a list of balances, including liabilities, shown by client ledger accounts and a cash book needs to be regularly used to show a running total of all transactions operated by the law firm.

A client account must have access and provide statements from the financial institution every five weeks. As part of this process, the law firm will also need to reconcile the bank statement with the cash book of transactions every five weeks.

There is also a requirement to maintain and keep a readily accessible trail of all bills, costs and written notifications made by the law firm.

These tasks are administration heavy, time-consuming and could delay a legal service practitioner from completing the tasks they are seeking to carry out for their clients.

Fortunately, rules 11.1 and 11.2 state that firms may enter into arrangements with a client to use a third party managed account (TPMA) as long as the client understands the terms of the arrangement, the process allows a client to terminate the TPMA and the firm is able to obtain regular statements in order to comply with other accounts rules.

Easing the Administrative Burden

Outsourcing legal cashiering services to The Cashroom will enable your firm to remain SRA compliant without spending hours of time fretting over the new rules and whether your actions are compliant. We are experts in the legal sector and understand a law firm’s adapting needs.

Allow The Cashroom to help your firm:

Maximise your resource: Benefit from a cost based on the actual activity and skill level your firm requires, rather than having to fund sufficient senior cashiering resource to deal with complex, high-risk elements, while using that same resource to carry out the more mundane, junior tasks.

  • Access expertise and insights: Get access to better forecasting data which provides valuable business insights that can be used to identify trends and inform your overall business strategy.
  • Get the best out of your system: The Cashroom supports any case management system, and has years of experience of utilising a huge variety of systems, enabling us to bring best practice processes to your firm.
  • Improve your cashflow: Ensure an up-to-date log of case-related fees and expenses for regular claim back purposes – resulting in a healthier cash flow.
  • Reduce your exposure to risk: The Cashroom has invested heavily in security measures and will enable compliance.
  • Improve efficiency and productivity: Free your employees to get on with what they do best and benefit from more streamlined processes.
  • Become more agile: Scale resource up and down as you need it, without the hassle of hiring and firing employees.

Here at The Cashroom, our team of qualified and experienced legal cashiers can be on hand to unburden busy conveyancing departments of their payroll duties, improving efficiency and ensuring that all law firms remain compliant with SRA Account Rule changes.

Contact Alex Holt for information about our services on alex.holt@thecashroom.co.uk or enquire through the website at www.thecashroom.co.uk

This article was submitted to be published by The Cashroom as part of their advertising agreement with Today’s Conveyancer. The views expressed in this article are those of the submitter and not those of Today’s Conveyancer.

Cashroom

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

The Cashroom Logo   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:  alex.holt@thecashroom.co.uk 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.angus@thecashroom.co.uk. 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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