So you have decided that you need a Legal Cashier or an Outsourced Legal Cashiering solution?
- What value do you assign to the role of the Legal Cashier?
- How much risk and responsibility does the role hold?
Salaries posted recently on recruitment boards suggest some Legal Practices might not see the role as very important or very risky. Simply paying minimum wages or offering roles that should be undertaken by experienced staff to juniors with poor supervision in place to manage them.
- Why should you pay your Legal Cashier a higher salary?
- Why should you Outsource?
- What can go wrong when Legal Cashiering goes wrong?
- Could you just save money and do it yourself?
Here we explore what can go wrong when inexperienced staff are let loose on your accounts.
Gatekeepers of Client Monies
The role of the Legal Cashier is to adhere to the Solicitors Accounts Rules and safeguard Client money. They are gatekeepers to Client funds. The risk of a poorly supervised junior Legal Cashier or inexperienced Legal Cashier within your legal practice is huge.
With little technical or practical knowledge of Accounts Rules, items may be posted to the wrong ledgers meaning that clients are overbilled, Client money may sit in the Office Account or Client ledgers may be overdrawn. So much can so easily go wrong.
Small, but innocent errors may be immaterial breaches in singularity, but where recurring, may represent a material breach which requires reporting to the SRA. That’s a disaster
What can go wrong within your Legal Cashiering department?
If Legal Cashiers are not fully supervised with a lack of daily oversight, they may not adhere to firm Policies and Procedures. This will create further governance and control issues. They may not realise that breaches of the Solicitors Accounts Rules have occurred. They won’t report a breach to the COFA. Which means it won’t be recorded on their breach register. It may only be when the annual Accountant’s report is completed by way of a Client Account Audit that errors are identified and bypassing the COFA, reported directly to the SRA.
In August 21, the SRA reported trainee Solicitor T Sadeeq and Legal Cashier D Cowley of fraudulently signing cheques. Both were handed a section 43 notice, banning them from working in the profession.
In April 15, the SRA reported a Senior Legal Cashier of misappropriating more than £150k in Client and Office money. Things do get investigated and the smallest overdrawn Client Account can trigger an investigation.
Firms with poor controls, lack of oversight or junior staff are unlikely to flag these activities or stop them from happening is a high risk.
Fee Earner Risk
Of course, Solicitors and fee earners may also create risk. Using the Client Account as a banking facility, improper withdrawals from the Client Account by way of propping up the Office Account or making fraudulent payments may occur in Sole Practitioner firms or larger firms. An experienced Legal Cashier should spot the signs and be able to either report or stop this from taking place. A junior Legal Cashier on a minimum wage or inexperienced Legal Cashier may not. Is that a risk you are willing to take?
In Dec 21, the SRA reported Z Khan had kept Client money in the firms Office Account, had paid money from the Client Account to his personal account and had made undue transfers from the Client Account to the Office Account. With a Client Account shortfall of £594k, former clients had to claim from the Solicitors Compensation Fund. Khan was struck off the Roll of Solicitors and ordered to pay costs.
In Nov 21, the SRA reported R Elliott had used the Client Account as a “piggy bank” and failed to safeguard client money and assets. Elliott was struck off the roll of Solicitors as a result.
In 2015, former Law Society council member, M Webster, was jailed for 8 months after making five fraudulent transactions from the Client Account and struck off the role of Solicitors.
Arguably a strong set of controls, governance and an experienced Legal Cashier could have prevented all of the above, if not from taking place, from progressing as far as they did.
Not only do these instances tarnish the name of the Legal Profession, but also the reputation of the firms at which these staff worked. Following SRA announcement and being picked up in the press, would clients choose these firms to work with in the future?
How can you reduce your risks?
Ultimately, Solicitors may be struck off the Roll of Solicitors, may incur costs, spend time in jail or lose their practice by way of an SRA intervention if serious Solicitors Accounts Rules breaches are found. Firms may also find a lack of new clients willing to work with them and increased Professional Indemnity Insurance. Once your reputation has been marked with an SRA breach it’s hard to convince clients you are the best choice to help with their legal matters.
The role of the Legal Cashier should be valued as an important one. A good Legal Cashier will prevent or flag issues before they happen and ensure compliance with the Solicitors Accounts Rules on a day to day basis. They can flag potential fraud or irregularities. They can stop issues before they occur.
So next time you are looking for a Legal Cashier, consider their value….
- Don’t see them as an overhead.
- See them as an investment in your Legal Practice.
- Pay them properly. Don’t offer them the minimum wage or a low salary
- Make them feel valued
- If Outsourcing, don’t look for the lowest priced service. You sometimes get what you pay for…
Learn more about Ascentant’s Legal Cashiering Services. If you’d like to talk to us in confidence about anything in this expert article, please feel free to get in touch.
Ascentant Accountancy are Accountant’s based in Derby who specialise in working with Small Businesses across the Country – Get in touch on 01332 981920 or info@ascentant.co.uk to discuss your needs.
We can be found at Suite 5 Keynes House, Alfreton Road, Derby, DE21 4AS.
