Legal Cashiers: A Necessity for Every Legal Practice
In this article, I explore some of the reasons given by firms for not using a legal cashier.. I will explain why I believe this course of action is flawed and assert that every practice should have a legal cashier no matter it’s size.
It may seem obvious that a law firm should have a legal cashier and many well-established firms will have a legal accounts department, sometimes with several cashiers working together. However, some solicitors still consider a legal cashier to be less of a priority. These include new start up companies where volume of work is initially quite low and sole practitioners who specialise in a niche area of law, with minimal volume when compared to a High Street conveyancing company.
In this article I will give compelling reasons why a legal cashier is necessary whatever your size or specialism.
Affordability of a legal cashier
Law Firms often cite cost as the reason not to use a legal cashier. In many instances the senior partner/director handles all their own bookkeeping and reporting because they do not feel they can afford the overhead of a legal cashier.
However a senior partner in a niche law firm will have an hourly charging rate based on their expertise within their field. This rate will be significantly higher than that charged by a legal cashier to process the accounts. It would therefore be much more cost effective for the partner to do fee-earning work to enhance the firm’s turnover and employ a legal cashier.
Peace of Mind, Security and Control for your practice
Many sole-practitioners like to keep control of their practices and therefore consider they must handle everything themselves. There are two reasons why this is not the best option.
Compliance – A sole-practitioner’s specialism generally is not legal cashiering or accounts. This means that even though the partner may feel that they are in control, there may be certain areas that get overlooked. Legal cashiers have a duty to keep abreast of all the latest developments with the SRA Accounts Rules and general compliance changes. They are therefore much more likely to spot a potential compliance breach or risk to client money and can highlight it to the COFA and handle it accordingly.
Security – Some solicitors may worry that using a legal cashier will make the firm’s accounts less secure. However, a second person reviewing all transactions moving in and out of the firm’s client accounts will make it more secure. The legal cashiers can highlight anything they are concerned about and discuss these with the partner. This makes for good bookkeeping, processes, and transparency regarding how client money is dealt with. When this is combined with dual authentication for all bank transactions, the systems become incredibly solid and secure.
Impact on time recording
The impact on time spent is a significant issue for legal practices. Almost everything is based upon time, from costs forecasting to resource planning and acquisition. There is often the belief that it will be faster for the partner to handle the accounts themselves than to provide information to the legal cashiers so they can do it. In practice, this is not actually the case.
The example below is of a typical payment out of client account:
Partner handling everything:
1. Login to the accounts system and check the ledger to see if the funds are received.
2. Find the bank details for the payment on the file.
3. Create a slip for the payment for the file audit trail for later auditing.
4. Login to the bank.
5. Set up the payment.
6. Send the authorisation to the second authoriser (if applicable) or sign and send themselves.
7. Login to the accounts system and post the entry on the ledger.
8. File the accounts slip either digitally or in the paper file.
The Partner’s involvement with a legal cashier:
1. Create an e-chit/Lawslip/requisition on the accounts system to include amount and bank details.
2. Check and authorise the payment which has been set up by the legal cashiers.
All the checking of the ledgers, setting up the bank payment, posting and filing of the slips would be done by the legal cashier. The steps for the partner have reduced from eight to two, saving significant time.
When we also take account of the bank reconciliations, monthly-reporting and COFA requirements, we can see that it is much more time-effective for the firm to utilise a legal cashier than not.
Conclusion
Having a dedicated legal cashier will save every practice money and time. It will also be more secure and the accounts themselves will be put under greater scrutiny which will lead to better compliance with the SRA Accounts Rules.
Alex Simons MAAT ILFM
Outsourced Accounts & New Business Manager
The Law Factory LLP
