Posted by Julian Bryan, managing director of Legal Futures Associate Quill
Time is running out to get ready for the revised SRA Accounts Rules, which go live on 25 November. Because the rules are a simplified version of what they were before, if you already complied, it’s entirely plausible you don’t need to do anything and may still comply now.
However, we advise against this myopic course of action.
In our opinion, you should use the remaining weeks to review your procedures and document how you will manage your accounts. The reason is that, although the rules are becoming less prescriptive, this actually means they’re more open to interpretation. In other words, mistakes and breaches will be easier to make if you’re too relaxed about your cashiering processes and timings.
Remember, too, that despite the rules allowing greater freedom over how you operate, the penalties for non-compliance are just as serious and enforced in the same way as they were previously. You should similarly adopt a zero-tolerance approach to non-compliance in your business.
If you’re unsure how to conduct an internal audit and update your office manual to get ready for 25 November, download our handy user guide and for our tips:
Know what’s changed: Some of the specifics are unaltered – eg, having to reconcile bank accounts every five weeks – whereas others have changed, such as obtaining accountants’ reports and more explicit obligations regarding payment of interest.
Adopt the old rules: Slightly contradicting what I said earlier, if you decide you’d rather still follow the old rules, despite them containing lots of complicated and specific technical requirements, you’re entitled to. You must state this in your policies and stick to it.
Either operate a client account: Ensure your client account includes the level of information required by the SRA and that you don’t provide banking facilities to clients or third parties. It’s essential that your staff are aware of the relevant money laundering regulations and what constitutes provision of banking facilities.
Or don’t operate a client account: Rule 2.2 is all-or-nothing, giving you the choice of exemption from having a client account. Note that this is across the whole practice, not on a client-by-client basis. Consider whether a straightforward office account would better serve your purposes. Whilst this may sound like an easier option (and cheaper, as it negates the need for accountants’ reports), it could create more work by, for instance, asking clients to pay third parties directly and subsequently making sure the payments have been made.
Maintain a breaches register: With your employees suitably trained to spot suspected breaches, you must document how discovered breaches will be rectified and keep a register of this information – breaches and rectifications.
Outline your payment of interest policy: As part of your defining terminology process, state what your policy on interest, is including when it becomes due and the rate you’ll use.
Check residual and suspense balances: Analyse which of these monies you currently hold, determine if you should be holding them, return to the proper recipients where possible and log what you’ve done if these people can’t be located.
Define ‘promptly’: This word is dotted throughout the new rules. What promptly means to one person varies significantly to another. Choose suitable timeframes for your firm and clarify in your office policies.
Set realistic expectations: Following on from the above, if you’re a rural practice with no easy access to a local bank or building society, don’t set impossible-to-meet timescales regarding paying in cheques, for example. Look at your unique circumstances and apply them to the rules.
Support your COFA: The SRA suggests you operate a system which allows you to produce a tri-balance comparison of your client bank, cashbook and client ledger balances. By checking and signing a report of this nature, your COFA can meet his or her SRA obligations.
Collaborate and communicate: This isn’t a one-person task; it’s something that should involve everyone in your organisation from your cashiers and solicitors to senior leaders and new starters. Seek input at the document review stage and roll out updated documentation with appropriate training company-wide. Don’t forget your accountant, who will write reports by checking what’s being done against what’s written in your policies. He or she needs to know what they are auditing to.
Ensure your legal accounts software complies: Probe your software provider about system enhancements made to cater for the cut-down rules. At Quill, we’ve introduced all manner of new functionality to our legal accounting software, ranging from narrative-only e-chits stating direct-to-third-party payments, to warning messages advising users to transfer monies relating exclusively to bills received.
Outsource your cashiering instead: If keeping up with ever-changing accounting rules and regulations is too onerous, there’s always the outsourcing route. Not only is Quill’s software compliant, but our outsourced cashiering service is too.