2 Financial Management -...

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Lexcel v6 manual May 2015 © Enderley Consulting Limited 2015

2 Financial Management

Introduction – the firm’s approach to financial management

The financial stability of the firm is essential for its survival and prosperity, and for ensuring that the business is run well for the benefit of its clients. The firm is in business to make a profit.

The Partners are focused on profitability rather than volume of work, endeavouring to ensure that each case is profitable: no profit, no firm. The firm will not knowingly take on business at a loss without the agreement of the Partners and only if satisfied that it is in the firm’s interests to do so. Financial stability is of great concern to the Partners and to the SRA.

Everyone in the firm has a role to play in ensuring sound financial performance.

To ensure financial stability the Partners observe the ‘good behaviours’ identified by the SRA in its financial stability guidance. In particular:

Both Partners regularly receive full financial information, including office bank balances

Drawings are linked to cash collection targets and do not exceed net profits

Provision is made from income received to fund Partners’ tax accounts

VAT is separately accounted for and appropriate transfers made to a tax account

A capital reserve account is built up by retaining a capital element from profit

Premises costs are regularly reviewed and contained

Profitability levels are tested and unprofitable work is (properly) dropped

Similarly the Partners avoid the ‘poor behaviours’ set out by the SRA in the same section.

http://www.sra.org.uk/solicitors/handbook/code/part3/rule7/resources.page

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2.1 responsibility for financial management

It is vital that client money is properly protected. In accordance with Rule 8 Authorisation Rules the firm has appointed Russell Conway as COFA. His key responsibilities are to:

ensure compliance with the SRA Accounts Rules

record all compliance failures relating

report any compliance failures to the SRA as soon as reasonably practicable, although non-material breaches can be included in the Information Report required under Rule 8.7 of the Authorisation Rules

supervise office account

be responsible for the firm’s overall financial management to include all accounting issues, financial stability, drawings policy, profit recognition, capital requirements, and cashflow

COFA must:

have access to all accounting records to include all client and office accounts and to interpret and assess that information

implement and oversee systems for compliance in relation to the SRA Accounts Rules

carry out regular checks on the accounting systems

carry out file and ledger reviews

ensure that only authorised people sign off (not initial) payments from client account and make recommendations of authorised persons

ensure that the reporting accountant can submit its report promptly and within the time period allowed in Rule 32.1 of the Accounts Rules

ensure that breaches of the SRA Accounts Rules are remedied promptly

report all material breaches, whether one-off or systemic, to the SRA

monitor, review and manage risks to the firm’s accounting systems

http://www.sra.org.uk/solicitors/handbook/introAuthPrac/authorisationrules/part3/rule8/content.page

http://www.sra.org.uk/solicitors/handbook/introAuthPrac/authorisationrules/part3/rule8/content.page

http://www.sra.org.uk/solicitors/handbook/welcome.page

http://www.sra.org.uk/solicitors/handbook/accountsrules/part8/content.page

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report serious concerns about the firm’s financial viability to the SRA

In considering whether a failure is ‘material’, and therefore to be reported to the SRA, COFA will take account of various factors, such as:

the detriment, or risk of detriment, to clients the extent of any risk of loss of confidence in the firm or in the provision of

legal services the scale of the issue the overall impact on the firm, its clients and third parties

In addition, COFA will need to keep appropriate records of failures in compliance to:

monitor overall compliance with obligations assess the effectiveness of the firm's systems be able to decide when the need has arisen to report breaches which are

material because they form a pattern

COFA will further bear in mind the SRA’s own regulatory risk assessment criteria.

COFA has the independence and the resources needed to perform the role properly and independently, record non-compliances, to report relevant issues to the SRA, and to discuss compliance matters with the SRA when necessary. The Partners have decided that a focus on regulatory risk is the most relevant and meaningful way to control other identified risks. For this reason the firm’s compliance plan (see Section 5.1 of this Lexcel manual) is strongly (but not exclusively) based on the SRA Code of Conduct and on the SRA Accounts Rules. The compliance plan contains a detailed analysis of the systems and controls COFA uses to manage risk.

The firm’s Internal Accountant, Pushpa Nathanwi, reports to COFA. She must report all breaches to COFA promptly, no matter how innocuous they might seem. COFA will determine the level of seriousness and whether it is appropriate to self-report.

http://www.sra.org.uk/risk/reports-assessment-method.page

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2.2 financial management reports

The firm’s Quill accounting system generates a large range of management reports both in respect of client matters and on the firm’s accounting performance. The following main reports are produced and provided to the Partners:

Annual Budget (including income and expenditure and, where appropriate, any capital expenditure proposed)

Annual income and expenditure accounts (certificated or audited accounts)

Annual balance sheet

Annual income and expenditure forecast, reviewed quarterly

Quarterly variance analysis on income and expenditure against budgets

Quarterly variance analysis of cashflow and cash flow forecast

Client Ledger Balance Report (monthly)

Amount of outstanding bills and length of time bills have been outstanding

Bills delivered (daily)

Cash received

Weekly time recording report for all fee earners

Weekly work in progress reports distributed to all fee earners

Client account reconciliation

The Firm’s Internal Accountant also maintains the following Excel spreadsheets for publicly funded matters:

Legal Helps

On account payment dates

LAA certificate limits with approved disbursements

Costs spreadsheet for certified work detailing: work in progress claimed interim payments balance claimed on files to costs draftsman

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profit costs assessed CLS1 to LAA dates with balances Files currently with the LAA – assessed bills CLS1s) Schedule of inter-parties costs detailing progress on costs awards

At least monthly the Partners review the above information and consider it actively, analysing budget variance reports and deciding what action to take in respect of them.

Cash is the lifeblood of any business, including law firms. It is critical that the firm has suffient cash to fund its ongoing operations. COFA keeps the cash flow forecast under continual review. Based largely upon the firm’s performance, income and expenditure budgets and any known or anticipated cycles in either, the Partners, with assistance from the Internal Accountant, produce a cash flow forecast and annual budget for the forthcoming year.

2.3 time recording

Some of the areas of work carried out by the firm (approximately 50%, being all conveyancing, all wills, and some probate) are billed on a fixed fee basis with the client receiving a fixed quotation at the start of the matter. The level of the firm’s charges in relation to fixed fee work is reviewed annually, weighing the average amount of work carried out against providing a competitive price to clients.

The firm will not accept litigation work on a fixed fee basis: at present litigation is accepted on an hourly rate basis only. The only exception to this is that the firm will consider undertaking work on a Conditional Fee Agreement basis subject to careful risk assessment. All such requests must be referred to a Partner before the firm accepts instructions or goes on the Court record.

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It is however vital that where the firm is not acting on a fixed fee basis that time is recorded accurately. Failure to record all time spent means that the firm’s accounting is incomplete, making billing much more difficult. Fee earners must record all their time accurately: discounts to the bill can be considered with the file Supervisor at the time the amount of the invoice is being considered.

On all matters where the firm is not working on a fixed fee basis, time is recorded directly onto Quill (save for three designated exceptions where timesheets are used and the time input into the system at the end of the day). Time is recorded in 6-minute units with each unit being costed at the hourly expense rate appropriate to the fee-earner. Where a number of fee-earners work on the same client matter it is likely that their time will be costed at different expense rates. Quill differentiates between activities such as attendance on client, letters, telephone calls, travelling time and so on. All time spent on a client matter must be supported by relevant evidence on the client file such as by a copy letter, print of an email, or a file attendance note.

On publicly funded cases the in-house costs draftsman will advise when the Certificate limit is being reached. It is for the fee earner with conduct of the file, in consultation with the file Supervisor, to apply to the LAA for an extension if appropriate. This process is critical to robust management of CLS cases and fee earners are encouraged to identify the likely need for extension at an early stage.

Fee earners must be aware that cases with a Civil CLS Funding Certificate are usually subject to a costs limitation (typically £2500 – note that unlike private matters this includes any enhancement or uplift, Counsel’s fees, and disbursements). Not only must fee earners record all their time, it is vital not to exceed the costs limitation (and any other limitation) as the firm will not be paid for it.

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Costs limitations are reviewed at weekly Departmental meetings. Whilst the in-house costs draftsman monitors work in progress against Certificate limitations, fee earners are responsible for monitoring costs limitations (including Counsel’s fees) on their files and must report to their Supervisor immediately if there is any likelihood that the limitation will be exceeded so that a request for an extension can be considered and made in good time. Fee earners are reminded that the firm will not be paid for work done beyond the costs limitation.

Fee earners are reminded that this is of particular importance on cases where there is a previous firm involved, as their costs will remain outstanding and will be included in the overall limitation. The firm is potentially at severe costs risk. In such cases fee earners must not accept instructions or go on the Court record without a Partner’s consent.

timesheets and file costing

This procedure covers the steps required to complete and process timesheets (where they are used) and to cost files using monthly print-outs.

The information on the timesheets is entered in the accounts system, and shows the value of work completed on a case at any point in time. Although it is not a definitive record, it does provide a guide for billing purposes. Used in conjunction with the file, and the disbursements record, the computer system enables all time to be charged for and promotes accurate billing.

the time sheet

All the information required for entering time is shown on the sheet itself.

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The bottom left area of the timesheet shows the codes allocated to the types of work carried out in the conduct of most public funding cases.

The bottom right area shows the hourly rates, or item rates, which are appropriate to the work types.

The upper area is the working area to be filled in by fee earners.

completing the time sheet

Time is recorded in units of 6 minutes. If more than 6 but less than 12 minutes, the time should be rounded up to the next unit (example 10 minutes = 2 units).

Letters and telephone calls are charged per item, so one letter or one telephone call = one unit.

Any type of preparation is paid at the same rate by the Legal Aid Agency, so for the purposes of completing the time sheet, attending the client in the office should be entered as preparation.

recording time

A new timesheet should be used every day.

Recording should start on the first line of the working area. A new line should be completed for each client. The file number and the client’s name must be entered.

The work type must be entered in the left hand section of the first divided box. The number of units must be entered in the right hand section of the same box.

Seven different timed activities can be entered along one line for any client.

Time sheets should be given to the Receptionist so that they can be entered into the computer.

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recording disbursements

Disbursements, whether paid by the firm (such as experts’ fees) or by the Legal Aid Agency (such as Counsel’s fees), must be entered onto the Disbursements Record Form on the file pocket.

Limitations on Public Funding Certificates usually include Counsel’s fees and other disbursements, so it is important to ensure that this checklist is up to date.

Please remember that all costs records are available to the client and to the Court, and in publicly funded cases to the LAA. For these reasons they must be totally accurate and transparent. Failure to record means that the time spent is irrecoverable. Over-recording is not acceptable.

Quill produces a weekly time recording report, which the Partners consider in the following week to identify trends in time recording and failure to achieve targets. Through the time recording process, the Partners constantly monitor the value of work in progress by fee earner, by Department, and for the whole firm. It is vital that all time is recorded, not only for immediate billing purposes, but so that the Partners can assess the firm’s tax liabilities, its lock-up, its likely income for the coming months and set it against anticipated expenditure. This is a key element of the Partners’ financial procedures, and essential for the sound financial management of the firm.

2.4 procedure in relation to billing clients

non-CLS funded clients

Save for wills, the firm’s practice is to take money on account. The amount will vary from case to case according to the fee earner’s estimate of likely cost but £2,000 is

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offered as a default amount. Fee earners must explain to clients at the outset that this will be offset against interim bills and that the firm will request top-ups at appropriate intervals.

In wills cases the firm does not take payment on account. Rather, clients are requested to make an appointment to execute their will and the invoice is presented then. Clients are encouraged to pay by card.

In conveyancing cases, the firm takes payment on account in respect of anticipated disbursements. Conveyancing cases are billed shortly before completion, the amount notified to the client with the completion statement, and the fee is then taken from the completion money. If there is a projected shortfall the fee earner must refer the matter to a Partner for decision.

In litigation cases, the costs rules (see Rule 2.03) require the firm to give the best information possible about the likely overall cost of a matter at the outset and when appropriate as the matter progresses. Giving an hourly rate at the outset is essential but is not enough on its own. Fee earners must therefore give a realistic and informed statement about likely cost and must review this frequently and keep clients informed on costs (as well as other issues) as the matter progresses. This is important because if the matter is underquoted th firm might not be able to recover its fees. Fee earners must use their professional judgement on this but should be aware that cost issues are one of the most frequent causes of complaint to the Legal Ombudsman.

If there is any doubt or if fee earners require a second opinion they should refer to their Supervisor or to a Partner before issuing costs information.

Except for wills and conveyancing cases, files are billed bi-monthly.

http://www.sra.org.uk/solicitors/code-of-conduct/rule2.page

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Before a bill is sent out to the client the fee earner must check the Quill accounts system to ensure that all disbursements have been billed. Three copies of the bill are prepared: one copy on the file, one to the client and a copy to the Accounts Department. The Accounts Department will double check the ledger against the bill to ensure that all disbursements have been charged for. On conveyancing matters completion statements must be provided to the Accounts Department to reconcile against the ledger.

Invoices must contain the standard wording concerning recovery of fees under O1.14. Fee earners must be aware that there is no longer any such thing as a remuneration certificate and must not use the term.

CLS cases

How the Firm cost manages CLS files

The firm undertakes both private work and work funded by CLS, and has contracts for Housing, Family and Mediation.

On receipt of a CLS certificate, the fee earner must send a copy to the in-house costs draftsman immediately. The file is then included on the Accounts Department’s Excel spreadsheet for CLS files.

The in house costs draftsman will notify the fee earner concerned when the matter is nearing the CLS costs limitation. It is for the Supervisor, in consultation with the fee earner, to determine when (and in what sum) to request an on account payment – see 3.3 below. In appropriate cases the Supervisor will refer the matter to the Senior Partner for decision. This amount is included on the costs draftsman’s report

http://www.sra.org.uk/solicitors/handbook/code/part2/rule1/content.page

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to the Senior Partner and is an important tool in robust management of CLS certificated matters.

On completed CLS cases the fee earner must submit the file promptly to the in house costs draftsman for costing so that a bill of costs can be drawn for assessment.

With a view to securing optimum financial performance on CLS files the Senior Partner meets the in-house costs draftsman weekly, to consider and action:

Legal Helps – starts as against limits

Legal Aid certificates – on account/interim claims and how much

Files subject to assessment of costs – amounts, next steps

CLS Claim 1s and files with the LAA

Future projected costs timescales – on account payments and finals - and billing patterns

Trends in assessment of costs

Any write-offs

Any lessons to be learned and implementation of them

billing CLS cases

In Legal Aid cases with a full CLS funding certificate it is for the in-house costs draftsman to decide when to submit a claim for payment on account, referring to the Senior Partner as appropriate. The claim will be calculated from the work in progress recorded, the maximum amount allowed to be claimed, and previous on account payments. The same applies to prior authority and payment on account for disbursements.

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On conclusion of a case, the final bill is submitted to the Court (if over £2,500) or to the LAA (less than £2,500) for assessment, as appropriate. Where the Court has assessed costs, it is critical to make a claim for payment within 3 months of receipt of the final assessment certificate from the Court. If the LAA is responsible for assessment, this must similarly be submitted within 3 months of the right to claim accruing.

Legal Helps are billed online, monthly.

The firm maintains a separate ring binder of copies of bills issued. This is a requirement of the Rules: see Rule 29.15(a).

debt management

The firm’s credit control procedures are based upon the following main principles:

wherever possible fee earners must obtain money on account from the client in respect of fees and expenses. If not done, the firm will expect there to be a good reason for not doing so

wherever possible fee earners must raise and issue interim bills at least every two months. The firm obtains client agreement in the client care letter. Clients are less likely to challenge smaller regular bills and where this does arise, the firm might have to consider whether to continue to act for the client

there will be a hastening process of escalating severity finalising in court proceedings being taken against the client. If a client has not paid within 28 days then the fee earner is to call the client at reasonable hours in the daytime to ask if there is a problem and to ascertain how the client can pay the outstanding bill, including taking payment in instalments (requires consent of COFA) or by taking payment over the phone using the firm’s card machine. It is critical that the firm deals with clients in a professional and sympathetic manner


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if the client still has not paid or attempted to pay within a further 14 days then the fee earner should ask a trainee solicitor to issue a formal letter

if the invoice remains outstanding after a further 14 day period the fee earner must escalate the matter to the Senior Partner, Russell Conway, for a further reminder

if the client still does not pay, then Russell Conway will decide whether to issue a claim form for recovery

if a claim form is issued, the Partners will consider appropriate enforcement strategy on a cost effectiveness basis

the credit control procedures will be actioned where appropriate by the relevant fee earner following notification of non payment by the Accounts Department

write-offs the firm’s procedure for managing debts that are unlikely to be recovered

Only a Partner may authorise the write-off of any balance in respect of costs or disbursements.

Towards the firm’s year end the Accounts Department produces a list of historic balances for detailed review.

At the end of each financial year all debts that have been outstanding for 12 months or more will be automatically reserved in the firm’s accounts. This will have the effect of reducing the profits for that year by the amount of the reserved debts. The reserved debts will remain on the individual client ledger account and can continue to be hastened for payment. If payment or part payment is received then the profit costs will be reinstated as if it was a new bill.

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Any remaining reserved debts from the previous financial year will normally be written off on the authority of a Partner. The write-off of any balance in respect of costs or disbursements or disallowed LAA claims can be authorised only by a Partner.

Such write-offs will have no effect on the profits as the reduction will have taken place at the reserving stage.

There will be times when a bill should be written off without the need to be first reserved, e.g. following bankruptcy. Again write-off can only be authorised by a Partner.

2.5 handling of financial transactions

The firm’s procedures for handling financial transactions are set out below.

receipts – cash, cheques or electronic payments

Most money is received into the firm by electronic means or by cheque, although clients occasionally offer cash.

electronic payments

Where money is received electronically, the Internal Accountant identifies the money, prints the notification from the bank, and sends the notification to the relevant fee earner, recording the payment on the appropriate client or office ledger.

The fee earner will complete an e-chit on quill, confirming whether the transaction is for client or office account. They will place the payment advice and a copy of the printed e-chit on the relevant matter file.

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Where mortgage money is received from a lender and the firm is acting for both the lender and the borrower it is acceptable to pay the money into the client ledger held in the name of the borrower but the notation must make clear that it is mortgage money and must also identify each client, as the funds belonging to each client must be clearly identifiable. See Rule 29.10(a). If the lender is a private lender (ie not a lending institution) then a separate client ledger is to be opened: this is required by Rule 29.10(b).

card payments

Credit or debit card payments can be taken over the phone, or when the client is present. Please insert your procedure for dealing with these payments.

cheque receipts

Cheques are recorded in the central Cheques Received Register (maintained on the Reception PC). The fee earner will complete an e-chit (in duplicate), clearly marked for client or office account, and forward it to Accounts for recording on the appropriate client or office account ledger and for banking the same day. A copy of the slip is also placed on the relevant matter file. Cheques are passed by the relevant fee earner to Accounts. If it is after the daily bank run, the cheque is to be placed in the firm’s safe overnight for banking at Lloyds TSB Bank plc Notting Hill Gate branch the following day.

Envelopes are checked to ensure that nothing is left in them.

cash receipts

The firm’s policy on cash receipts is influenced by its responsibilities under the anti-money laundering legislation, the inconvenience of handling it and the greater risk

http://www.sra.org.uk/solicitors/handbook/accountsrules/part6/rule29/content.page


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which cash transactions pose as a matter of prudence and overall risk management. Receipt of cash funds from a client is discouraged at all times. The firm’s general policy is that the firm does not accept cash payments in excess of £500 without the specific sign-off of the Partner responsible for the matter.

If accepting cash, you must:

check that the notes are genuine and not forged

count the money in front of the client and confirm client agreement to the sum concerned

give a written receipt from the firm’s receipt book. A compliments slip or similar is not acceptable. The client must countersign it in your presence

never leave it unattended, for example on a desk or in a drawer

complete a blue slip (in duplicate), clearly marked for client or office account

place one copy of the slip of the relevant matter file

pass the cash and the duplicate slip to the Internal Accountant, Pushpa Nathwani, for recording on the appropriate client or office account ledger, and for banking the same day. If it is after the daily bank run, the cash is to be placed in the firm’s safe overnight for banking at Lloyds TSB Bank plc Notting Hill Gate branch the following day

banking procedure

The Accounts Department is responsible for processing all monies received into the practice and for the daily banking. Once the receipt of the payment is recorded as above, Pushpa will prepare bank paying in books.

If there is any doubt about whether money received is client or office money, then you must check with the Internal Accountant or a Partner. In an emergency or if

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there is any doubt, pay the money into client account and refer the matter to COFA at the earliest opportunity. It is imperative that a receipt of mixed money is dealt with at the earliest possible opportunity but in any event within 14 days: see Rule 18.3.

Receipts from the Legal Aid Agency are an exception to the above rules.

See Rule 19.

All monies received into the office in the form of cash or cheques must be processed and paid into the firm’s bank at the first available opportunity and not less frequently than once per working day. The person doing the banking must obtain a stamped receipt: the envelope deposit facility is not to be used.

Failure to identify money properly and to treat it appropriately is a serious breach of the SRA Accounts Rules. See for example (using your PDF reader) SRA -v- Maguire [11166-2013].

cheque requisitions

Where a payment out of client or office account is required, the fee earner must complete a computerised e-chit, clearly marked for client or office account (as applicable), and have it counter-signed by a Partner.

If from client account, the payment MUST fall into Rule 20. These are the ONLY types of permitted withdrawal from client account.

If the withdrawal is by bank payment, then you must complete a bank transfer form as well as the slip.

The e-chit (and, if appropriate, bank transfer form) is then delivered to the Accounts Department who will enter the matter onto the appropriate client or office ledger.



http://www.solicitorstribunal.org.uk/Content/documents/11116.2013.Maguire.pdf

http://www.solicitorstribunal.org.uk/Content/documents/11116.2013.Maguire.pdf


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Providing sufficient funds are held they will then arrange for a cheque to be drawn and signed by a Partner. Only Partners may sign on either client account or office account. The cheque will then be forwarded to the relevant fee earner. A copy of the appropriate cheque requisition slip must also be placed on the matter file.

Fee earners must be aware that it is a serious SRA disciplinary matter to overdraw an individual client account. This includes drawing against uncleared items. The Accounts Department has strict instructions never to allow this. There are no exceptions.

Great care is needed where a client requests payment to a third party, including where the client is two or more people and payment is to be made to one only. In such cases a written authority is required, to be signed by all clients. Fee earners must bear in mind the possibility that informed consent was not given, for example because of duress. If there is any doubt, the firm will not pay out without further comfort, and in extreme cases will pay the money into Court.

The firm will usually pay client money electronically to a UK bank account, and will never pay out client money by cash.

If you have requisitioned a withdrawal by cheque and it is properly signed off in accordance with these procedures, you must send the cheque to the intended recipient immediately. It is unacceptable – and might lead to SRA sanction - to hold onto the cheque as it creates the misleading impression that it has been paid.

Where the firm has small balances the firm may follow the procedure set out in Rule 20.2, as follows:

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‘A withdrawal of client money under rule 20.1(j) above may be made only where the

amount held does not exceed £50 in relation to any one individual client or trust

matter and you:

(a) establish the identity of the owner of the money, or make reasonable

attempts to do so;

(b) make adequate attempts to ascertain the proper destination of the money,

and to return it to the rightful owner, unless the reasonable costs of doing so

are likely to be excessive in relation to the amount held;

(c) pay the funds to a charity;

(d) record the steps taken in accordance with rule 20.2(a)-(c) above and retain

those records, together with all relevant documentation (including receipts

from the charity), in accordance with rule 29.16 and 29.17(a); and

(e) keep a central register in accordance with rule 29.22.’

Only COFA has the authority to undertake withdrawals in accordance with rule 20.2. For further guidance on withdrawal of residual client balances, see here

transfers

Where a transfer is required an e-chit must be completed and signed by the fee earner. This must be passed to a Partner for counter-signature, with a print of the appropriate client ledger.

A Partner must countersign transfers from one client account to another before the transfer is effected.

http://www.sra.org.uk/solicitors/code-of-conduct/guidance/guidance/Withdrawal-of-residual-client-balances.page

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Fee earners are reminded that the firm must have issued an invoice before funds can be transferred from client account to office account.

In respect of reimbursements of disbursements, it is the firm’s practice to issue a disbursement-only invoice before any transfer is made.

In the very rare case of a transfer from office to client, the slip must be signed by a Partner. The transfer slip must be forwarded to the Accounts Department with a copy placed on the matter file with a clear written explanation of why the transfer was required. COFA will review the matter and consider the lessons for the future.

petty cash

The Accounts Department maintains and reconciles a small cash float. Anyone requiring petty cash should complete a white slip, to be countersigned by a Partner, preferably with a VAT receipt attached. The Internal Accountant will only pay petty cash on production of a slip signed by a Partner.

purchasing control

The Partners exercise tight control over office account spend. All requests for stationery and consumables must be emailed to the Receptionist.

The Receptionist is authorised to order office supplies, such as paper, pens, envelopes and staples, up to the value of £50.00 without Partner consent. Any orders over £50.00 require Partner sign off.

authorisations

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Only a Partner can authorise any payment out of client or office monies by cheque or transfer, or of petty cash, irrespective of the amount.

amendments to cheques

No cheque, whether drawn on Client Account or Office Account, is to be amended in any way without reference to the Accounts Department. If the amount of a cheque is to be altered, then the related posting transaction must be altered and in order to do this the Accounts Department must be notified. Normally the faulty cheque will be cancelled and a new cheque issued.

receipts from third parties

In order to ensure compliance with the firm’s anti-money laundering rules any cheques received from third parties are to be photocopied and the copy stored on the relevant matter file. You should be certain of the identity of the drawer: this will invariably require an identification and verification process in respect of the person/s concerned, in accordance with section 5.13 of this manual.

client ledger balances report

Rule 14.3 states:

Client money must be returned to the client (or other person on whose behalf the money is held) promptly, as soon as there is no longer any proper reason to retain those funds. Payments received after you have already accounted to the client, for example by way of a refund, must be paid to the client promptly.

and Rule 15(4) states:


http://www.sra.org.uk/solicitors/code-of-conduct/accounts-rules/part-b-accounts-rules.page#r15

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You must promptly inform a client (or other person on whose behalf the money is held) in writing of the amount of any client money retained at the end of a matter (or the substantial conclusion of a matter), and the reason for that retention. You must inform the client (or other person) in writing at least once every twelve months thereafter of the amount of client money still held and the reason for the retention, for as long as you continue to hold that money.

These rules make clear that the firm is not allowed to retain client money save in certain narrow circumstances. The Partners expect fee earners to review their live cases regularly and to bring the client ledger balances report when they review their files with the responsible Partner.

The client ledger balances report is produced on a monthly basis. The report shows:

client name, matter number, work type

balances on client and office accounts

balance of unbilled disbursements

balance of outstanding debts

The report will be reviewed by the Partners and where appropriate matter files will be updated by:

updating the client on costs information including estimates, and matter activity

raising any outstanding client to office transfers

raising an interim bill where due

hastening any client debts

clearing any remaining small balances on completed matters

archiving files that are fully completed

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Through taking such action, client matters will be kept up to date. This is a significant part of client care procedures and the firm expects and requires fee earners to prioritise return of client funds.

client account reconciliation

The SRA Accounts Rules require the firm to reconcile its client accounts no less frequently than once every 35 days. See Rules 29.12 - 14. This important process is the responsibility of Accounts Department but is the collective responsibility of the Partners.

The firm’s practice is to reconcile at least monthly. The firm maintains one general client account and does not maintain any designated accounts.

This requires the firm to compare a listing of all the balances held on client ledgers against the balance held on the client bank account and also as against each client ledger, and to account for the difference – there will almost always be a difference. Generally this will be the total of unpresented cheques, and credits that the bank has not yet entered.

It is of the utmost importance that any discrepancy is investigated and remedied at the earliest opportunity. Discrepancies are to be elevated to Russell Conway, the Senior Partner and COFA. If there is a shortfall then the firm will remedy it immediately and reimburse the client account from its own resources.

It is equally important that lessons are learned from any such exercise so as to avoid repetition.


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Although the rules do not require it, the firm’s practice is to sign and to date reconciliation reports. The firm must store them for at least six years – see Rule 29.17.



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