SRA Compliance vs Statutory Compliance
In legal firms SRA compliance is extremely important, but has it got to the point where so much emphasis is placed on SRA compliance that legal firms’ own statutory accounts are being neglected?
Often legal cashiers are favoured over more general accountants or bookkeepers. However, it is important that the skillsets of both are utilised, firstly to comply with SRA regulations and pass the SRA Audit and secondly to pass any statutory audit requirements. There is also a third aspect to consider which is often overlooked and this is the management accounts.
We should always be thinking:
How can we become more profitable?
Have we got spare capital that we can invest and grow the practice?
What are we trying to achieve as a practice?
Factors to consider:
1. Economic Conditions
It is vital under the current economic climate that just as much emphasis is placed on our own accounts as maintaining our client account records. Having strong and regular management accounts and guidance can provide the following benefits:
Will we be solvent in 12 months’ time? Has something unexpected changed in the environment we operate in? Which areas can we cut back in to improve our cash position and protect the future of our company?
Performance Reports – Are fee earners meeting monthly chargeable unit targets?
Are we comparing our actual performance against budgeted performance? Do we even have a budget?
Has the budget forecast been adjusted periodically through the year to reflect changes we didn’t anticipate when planning for the year ahead?
Does our reporting align with our goals as a company?
2. Small Companies Audit Exemption
A small company in audit terms is a company that meets two out of the three following criteria:
Turnover under 10.2 million
Total assets under 5.1 million
Number of employees under 50
This usually provides an exemption from a statutory audit unless they are members of a group or are a charity that are required to follow the charity audit thresholds.
When a company is approaching/exceeding these thresholds, it is vital that accounts are prepared in accordance with approved accounting standards, this ensures the statutory audit is as smooth as it can be.
Conclusion:
In my experience of working with a variety of legal firms and charities and especially in legal firms, there needs to be an improved focus on the firm’s own company accounts whilst still maintaining client account records. Can your firm have it both ways? … Yes you can!
Sam Keetch ACCA
Legal Accounts Manager
The Law Factory LLP