Solicitors’
accounts can be a minefield. Solicitors have enough on their plate without the
additional stress of trying to remember and apply all the Solicitors Accounts
Rules (SARS) that exist, and so for this task, they may well rely on their
Legal Cashiers. In this article, we attempt to outline the top 7 tips that all
solicitors should know when it comes to Legal Accounts.

1. Purchase invoices/counsel / expense receipts must be retained
for VAT purposes.

It doesn’t matter what the amount is, any expenses need to
be supported with a receipt. If a vat inspection took place this information
needs to be produced.

2.
Outstanding bills with money in client account ? need a weekly report.

SARS states that monies in client accounts, relating to
payment of bills need to be transferred 14 days from receipt. If these are left
for more than 14 days you will be in breach of SARS. So solicitors do need to
be on top of their books, to be able to ensure that the relevant postings are
made in good time.

3.
Balance in client account must be returned it to the client.

It is important the balance is not billed to clearall funds. Any balance must be
returned to the client regardless of the amount. For small amounts for example,
anything under £1.00, then it’s best to return that in the form of stamps as
you often find that many people won’t cash small value cheques, and so you are
left with lots of unreconciled cheques waiting to be cleared in the bank. Many
solicitors have small balances going back many years. As an exercise, it might
just be worth trying to contact these past clients and returning their funds to
them. It will simplify matters, and who knows, they may need your services
again ? you could be contacting them at the right time.

4. Use
the office account when you want to draw a cheque against uncleared funds.

You actually don’t have to sit and wait for funds to
clear? if you get the authority from a practise partner, then you can draw a cheque
against uncleared funds. On the one hand, this can save you time in your
practice, but you need to be aware, because if the cheque is returned as unpaid
you are in breach of SARS. Drawing funds, which ultimately turn out to not
exist will result in an overdrawn client account. This is not allowed, because
it means you’ve used client A’s fund to support the activity of Client B.
Client B needs his own money. Overall, the best way to avoid any of the above
is to have your unpaids go through the office account.

5. Have a
process for sending funds back to the client.

This is similar to tip 3, but
it’s slightly deeper. Despite many solicitors ?knowing’ that they really ought
to return clients funds to the client, very few actually get around to it.
Failing to do this results in cumbersome books, and you don’t want this. What
you need is a process for sending funds back to the client ? particularly when
the cheque has not been cashed. You can’t just close these accounts, if they
have uncleared cheques sitting there. Nor can you just keep the money. You need
to show that you have attempted to return the funds more than once. Failing
this, then the solicitor needs to make an arrangement to send the funds to the
Law Society. They have a Benevolent Fund, and they make the decision whether it
will go to the charity or whether you can keep it. If it’s for under £50.00
then it can normally go to a charity of your choice e.g. The MS Society. But
what you cannot do is send the client a bill for it. Some solicitors do it, but
it is wrong.

6.
Cheques drawn should be sent to the client immediately.

Large cheques drawn and not banked after two weeks should
be queried. If you haven’t sent it out, it should be returned to cancel with
possible interest added to the cheque. Solicitors have been known to draw
cheques and sit on them while they benefit from the interest. This is wrong.

7.
Documentation for yearly audit must be retained and filed in date order.

Paying
in books, bank statements and bank reconciliation’s signed by partner, are
items that the auditor needs to refer to, to perform the yearly audit. Ideally,
archive the records , and keep them for 6-year minimum in case an Inland Revenue
enquiry arises.

About the author

Tags: breach, cheque, cheques, client accounts, exercise, good time, invoices, legal accounts, legal cashiers, monies, receipt, receipts, relevant postings, right time, sars, solicitors, stamps, stress, time 3, vat purposes

Related Posts

• Will the Credit Crunch Close down Conveyancing Solicitors?
• Test For Obviousness - Inventive Step Response
• Medical Negligence Explained
• Intellectual Property - Copyright Infringement - Trade Mark Infringement
• Intellectual Property Law – Patent Law – Invalidity For Obviousness