Solicitors Accounts Rules – overcoming problems
Monday, 29 October 2018
In my recent blog, Solicitors and SAR audits – common problems, I discussed some common problems I’d noticed in this year’s SAR audits. Here, I’ll discuss how to tackle other key issues.
Drawing on earmarked funds
There have been a number of occasions where client funds have been used to settle the firm’s bill, and are transferred after normal billing procedures (rules 17.2 and 17.3). Later it emerges that the funds are needed, usually upon a request for payment. An urgent reverse transfer has to be arranged to correct the error, and a breach is recorded on the register.
The underlying problem is not properly identifying the receipts coming into the client account.
To tackle this problem, fee earners should take great care when identifying incoming receipts for their clients, particularly where there are multiple active matters for the same client, and where no supporting description is provided on the cheque or bank transfer. The fee earner has more knowledge about their client and the incoming amounts than the accounts team. Therefore it’s crucial that they pass on this knowledge so that an accurate description of the receipt is entered onto the ledger. This, in turn, means that the ledger card is reliable when considering a transfer from the client account to settle the firm’s bill.
Writing up records properly
We see a wide range of transaction-recording systems used by solicitors, most of which are intuitive, user-friendly and helpful in compliance matters and protecting client money. All systems, however, are only as good as the data entered into them.
We know no one is perfect and that we all make mistakes, which often result in a breach of the rules. However, such breaches aren’t usually that serious. What’s more concerning is seeing ledger cards containing transactions that don’t reflect the actual state of affairs, specifically where entries to correct earlier errors are ‘back-dated’, or where such an entry appears out of date order on the ledger.
It goes without saying that entries on client ledgers need to show all financial transactions accurately (rules 29.2 and 29.9 make this quite clear), so that the correct balance is displayed clearly at all times and can be relied upon. Doing so avoids creating bigger problems in the future.
Speak to me if you have any concerns or questions about how to identify available funds on client matters, recording transactions on your accounting system, or any other SAR-related matter. Call me on 0330 024 0888.