Ultimate guide to legal cashiering #1: The basics18/07/22
We’re kicking off our ‘Ultimate guide to legal cashiering’ blog series, adapted from our new e-book, with a brief introduction to the cashiering process including the key regulations in force, what’s at risk by getting your cashiering wrong and main responsibilities of your legal cashier.
Q: What’s the quickest way to get your law firm shut down?
A: Legal cashiering… if it’s not done correctly, that is.
Like a lot of back-office functions, legal cashiering can often be an afterthought for law firms. The last thing any solicitor wants to think about is crunching the numbers, especially when the case work is piling up, but without effective accounting controls in place your firm is at a major risk of failing stringent regulations.
And when that happens? Fines, reputational loss and potential closures are sure to follow.
Couple this with the fact that legal cashiering represents one of the biggest opportunities for reducing costs and increasing efficiency at your law firm, you have to ask yourself: why wouldn’t I want to get it right?
At Quill, we’ve been bringing law firms and their accounts up to speed for over 40 years. If there’s one thing we’ve learned in that time, it’s that few law firms can afford to
ignore the importance of legal cashiering. Can you?
A brief introduction to legal cashiering
Before we dive into the complexities, let’s familiarise ourselves with the basics.
What is legal cashiering?
Legal cashiering is a specialised type of bookkeeping which ensures a law firm’s finance accounts are managed in accordance with legal-specific regulations, on top of the usual rules which apply to all forms of accounting.
Why is it important?
Not only do legal cashiers oversee and speed up all of your day-to-day financial transactions, they also ensure that your finances are accurate, ethical and compliant. In short, they keep your money moving, and they keep it clean.
What are some of the key regulations?
- SRA Accounts Rules: The Solicitors Regulation Authority is the regulator of solicitors and law firms in England and Wales, overseeing more than 200,000 solicitors.
- CLC Accounts Code: The Council for Licensed Conveyancers sets the standards for specialist conveyancing and probate lawyers.
- Scottish Accounts Rules: These standards are regulated by the Law Society of Scotland, the professional body for Scottish solicitors.
- MTD for VAT: The Making Tax Digital initiative requires VAT-registered businesses with taxable turnover above the VAT registration threshold (currently £85,000) to keep records digitally and submit their VAT returns using MTD software.
- 5MLD: The EU’s 5th Money Laundering Directive was transposed into UK law on 10 January 2020, and is designed to prevent the use of the financial system for money laundering or terrorist financing.
Legal cashiering in numbers
- The SRA is increasing its fining powers by over 1,000% from £2,000 to £25,000. (Source: The Law Society Gazette)
- Two-thirds of firms reviewed by the SRA in 2020 needed “some form of engagement” with the regulator as a result of anti-money laundering checks. (Source: The Institute of Legal Finance & Management)
- Outsourcing your legal cashiering can save you around 30% in salary costs. (Source: Law Firm Ambition)
- If qualified legal cashiers are worth their weight in gold, then a single legal cashier is worth £3,706,303.93. (Source: Average UK adult weight x the price of gold*; *Accurate as of 21st June 2022)
A day in the life of a legal cashier
A legal cashier is responsible for handling all the finances of a solicitor’s practice or law firm. If that sounds simple, it isn’t.
Some of the main responsibilities of a legal cashier include:
- Process accounting transactions (both received and sent) by bank transfer, cheque or other means
- Performing bank reconciliations so that bank accounts and books tally up
- Producing daily, weekly and monthly reports on financial status
- Checking for errors and reporting any accounting breaches
- Invoicing clients for work done and chasing overdue monies
- Processing disbursements and expenses
- Submitting quarterly, monthly or yearly VAT returns via HMRC’s MTD portal
- Maintaining separate client and office ledgers in chronological order
- Ensuring compliance with relevant rules and regulations
- Liaising with compliance officers, clients, auditors, regulators, suppliers and banking accountants
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