Every Sole Practitioner has many plates to spin: practising technical law; adhering to regulations, keeping on top of compliance; their own marketing; navigating the best PII deal; and of course, the accounting.

Further to the sorry tale of the inexperienced law firm owner, Danielle Louise Shawcross, fined £5,000 owing to client account misuse, highlighted to us how solicitors and lawyers often assume their “bookkeeper” has all the implications of client money figured out, thus all will be well.

There is a difference between a Bookkeeper and a Legal Cashier

Ms Shawcross admitted to the Solicitors Regulation Authority (SRA) that she had “massive holes” in her knowledge of the SRA Accounts Rules and other compliance issues. Only three years’ qualified when she set up her law firm and brought on a bookkeeper at the same time. The bookkeeper came in once a week for a few hours, but it clearly appears that Ms Shawcross did not realise that bookkeepers per se, are not Legal Cashiers. Legal Cashiers are highly trained and sought after owing to their knowledge and studies in double ledgers, SRA Accounts Rules, and Legal Finance Compliance. It is a specialist qualification and role in a law firm.

In the SRA findings, Ms Shawcross admitted that she did not fully understand the firm’s accounting system and the process of reconciling client ledgers, as well as fully understanding the SRA Rules around client money; and neither did the bookkeeper.

The good thing mitigating Ms Shawcross’s errors was that she made sure an accountant came in to oversee any oversights. The accountant’s report (back in 2018) is what alerted the SRA investigation as it found “significant weaknesses” in her accounting systems.

Legal Futures wrote a journalistic take on this matter, and the biggest takeaway the Institute of Legal Finance and Management (ILFM) have from the findings is that one must never assume a bookkeeper brought in to oversee one's bank reconciliations, client ledgers and client monies knows about the specialist role that is "Legal Cashiering".

The inexperienced Ms Shawcross (who had assumed the bookkeeper’s assurances that the accounts were responsibly managed) was more than unfortunate as it led to this article and what not to do as a law firm owner. There is a significant difference between general accounts and solicitors’ accounts, and one she should have clarified and processed better.

Qualifications for a Legal Cashier

The Institute of Legal Finance and Management (ILFM) is the professional body for legal finance qualifications.

The Diploma suits those new to legal finance and solicitors’ accounts. The diploma qualification comprises two certificates:

1. Bookkeeping for Legal Finance Professionals; and
2. Legal Finance Compliance & Accounts Rules.

The Diploma qualifications provide a sound, comprehensive and practical knowledge of how to maintain solicitors’ internal records and how to comply with regulatory Accounts Rules.

Students may apply for an exemption from the Bookkeeping for Legal Finance Professionals Certificate if they already have a relevant qualification.

There are subsequent qualifications that legal finance personnel can study to further their career in law, such as our Associate Level Qualification.

Those who have been awarded the ILFM Diploma (above) can register for the associate qualification (AILFM), which comprises four certificates:

1. Accounting for legal finance professionals,
2. Financial management,
3. Tax for legal finance professionals, and
4. Legal practice management.

Law Firm Start-Ups – Best Advice

Ms Shawcross is not the only solicitor who has started up a law firm and found herself drowning in rules, regulations, and compliance.

If you are going to run a regulated law firm, then the list below, is the very least you should be aware of:

• PII – PI insurance is a huge chunk of your turnover
• Compliance Training
• Practising Certificate purchase each year
• Investing in a qualified Legal Cashier
• Yearly client account audits
• Risk Assessments and Due Diligence
• AML Training
• Thorough Conflict Checks
• IT and website development
• Software implementation and utilisation
• Marketing
• Business Development
• Client Acquisition through Marketing, Networking and Business Development
• Recruitment and contracts

There are great networks on and offline for peer support, and exceptional consultants ready to help with their expertise. At the ILFM we have Engage Partners with whom we have reciprocated support, including CILEx, Lawnet, ICAEW and Legal Support Network.

Training for Legal Finance and Legal Management Personnel

If you require information, resources, training, and membership with regards to your legal accounts and billing, VAT and Disbursements, compliance (COFA specifically), SRA Accounts Rules, anti-money laundering compliance, risk management and practice management, then the Institute of Legal Finance & Management is the professional and leading body for this sector.

Breaching client accounts through an assumption that your generalist bookkeeper (with no ILFM legal finance training or qualifications) has you and your firm's accounts covered is something that should not happen.

If you are lucky enough to work in a larger law firm and are not sure if your Legal Cashier, or Legal Finance colleagues are ILFM qualified, do ask them as their membership is individual.

Many of our members’ senior management teams pay for their studies and CPD for firm protection, client money protection as well as those professionals feeling motivated, valued and more likely to stay in the firm! 

Attracting great legal finance teams and retaining them is a massive trending topic and a matter the ILFM can help with.

If you would like to know about individual membership or corporate membership, please get in touch as we are THE professional body here to protect you, your client accounts, and your legal finance teams.

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