Legal accounts rules: your responsibilities and how to comply by Julian Bryan, managing director at Quill
Where duty of care is concerned, protection of client monies is one of the highest priorities for law firms. As well as financial security being an obvious responsibility, it’s a vital regulatory obligation too.
Depending on your specialisms and location, your legal practice will follow the SRA Accounts Rules, CLC Accounts Code or Scottish Accounts Rules. Whilst there are subtle variances between, one thing remains constant: the requirement to ensure your client’s money is clearly identifiable as theirs. Typically, this means holding funds in a separate, named client bank account. In some circumstances, your regulator may allow client funds to be held in your office account or you can choose third-party managed accounts (TPMAs) as an option.
To complicate matters slightly, legal accounting regulations are never static; not least the new SRA Accounts Rules which came into effect on 25th November. Staying abreast of the changes and understanding the implications for your business is quite a challenge. Yet it’s essential. So, the revised SRA Accounts Rules will be our focus here.
But, before all that, let’s stop for a moment to consider the risks to client monies. Economic crime takes many forms – money laundering, financial terrorism and misappropriation amongst them – and you’re both tempting prey and a potential weak link in the chain.
The former – tempting prey – is due to the vast sums of money being handled on clients’ behalf. The financial services sector, of which law firms form part, facilitates around £90 trillion changing hands every year.
The latter – weak link – refers to vulnerabilities arising from possible limitations in cyber defences. According to the National Crime Agency, the annual cost of fraud in the UK is £190 billion. Thankfully, the ‘weak link’ situation is changing as our industry becomes more fraud aware and technologically innovative.
It thus follows that you need to put sufficient safeguards in place to protect client money and avoid regulatory breaches. How exactly can you go about this somewhat daunting task? The answer is surprisingly easy: select Quill!
You see, at Quill, we’re absolutely committed to accountability to you and accountability to regulators. This accountability promise is an integral part of our branding. Our entire portfolio of software and outsourced services is built to empower you to adhere to accounting rules, meet professional standards, gain accurate financial insights and tighten security.
Our products deliver a whole host of other benefits including gaining performance intelligence to take control of your financial status, undertake cash flow forecasts and grow your business. Where cashiering’s concerned, our solutions ensure your client monies are in the right place at the right time.
Ahead of the SRA Accounts Rules deadline, we published a comprehensive list of audit tips for conducting an internal review and updating your office manual in readiness for go-live. This guidance covered important subjects such as how to operate a client account, apply the rule 2.2 exemption to only hold an office account, maintain a breaches register, outline your payment of interest policy, check residual and suspense balances, and make sure your legal accounts software caters for the rules. Take a look at www.quill.co.uk/audit-tips.
Another preparatory resource was our step-by-step SRA Accounts Rules user guide to our Interactive legal accounting system. This useful document was written to take users through each section of the rules in turn, explaining what they mean and who they apply to, with recommendations for putting them into practice and detailed instructions on related software functionality supported by screen shots.
Having undergone notable development these past few months, our Interactive application contains lots of new and enhanced features to assist compliance from warning notifications about transferring disbursements from client account upon receipt of client bills to expansive range of reports which keep your finances on track, for example ledger balances and SRA breaches. Download our user guide from the same www.quill.co.uk/audit-tips web page.
Our latest new software tool is called MoneyChain. We know that making sure money’s transferred to the correct client, opposition, counsel or supplier is fraught with risk so we’ve developed close integration from the e-chit created by your fee earner in Interactive to your online banking software. MoneyChain adds confidence and robustness to the chain of events surrounding the flow of funds through your practice because it:
- Provides real-time alerts of money receipts in to your office or client account thereby saving your cashier from having to constantly log in to your online banking platform*;
- Carries out instant verification of every bank account number and sort code entered against the national database** as soon as a fee earner makes a payment request or payment details have been received;
- Aids the production and uploading of internet banking-ready payment files using these pre-verified account details to save any re-keying and reduce risk of errors when preparing third-party payments;
- Can by operated by our Pinpoint team for outsourced cashiering service clients which means our cashiers prepare outbound payment requests for authorisation by your in-house staff in line with your firm’s mandate. Pinpoint and MoneyChain together bring even more time and money saving, and security strengthening advantages.
Read further information about MoneyChain at www.quill.co.uk/moneychain.
We’ve also launched an exclusive partnership with Shieldpay, one of the leading pioneers in TPMAs. Covered in part 3 of the rules and referenced at the beginning of this article, TPMAs are an alternative to handling client monies directly.
By using Interactive and Shieldpay in tandem, accounting transactions are recorded in the Shieldpay bank account just like any other bank and the corresponding transactions logged on each client’s ledger in Interactive. You’re given online access to your Shieldpay account to manage and view transactions pertaining to clients’ matters. Find out more at www.quill.co.uk/shieldpay.
Finally, we offer a timely reminder that, if keeping up with ever-changing accounting rules and regulations is too onerous, there’s always the outsourcing route, as intimated earlier. Not only is our software compliant, our Pinpoint service is too. Our role is to stay up-to-date with sector developments, solicitors’ accounts rules included, to ensure our clients comply with regulators. For busy practitioners, it’s one less load on your mind.
Why not contact us to talk about accounting rules and regulatory compliance? Email firstname.lastname@example.org or call 0161 236 2910. We are the legal accounts experts after all.
Julian Bryan joined Quill as Managing Director in 2012 and was also the Chair of the Legal Software Suppliers Association from 2016 to 2019. Quill has been a leading provider of legal accounting and case management software, and the UK’s largest supplier of outsourced legal cashiering services to the legal profession for over 40 years.
* Specified banks only
** Extended Industry Sorting Code Directory