Common mistakes with SRA-compliant record-keeping and how to avoid them
The Solicitors Regulation Authority (SRA) has strict requirements for financial record-keeping within a law firm.
If firms fail to meet these requirements, they could face fines, tribunals or operational consequences. Firms need to understand how to best manage their record-keeping to ensure that they are compliant with SRA rules.
Delayed transaction logging
Failing to record client and office account transactions promptly can lead to inaccuracies, missing information, and compliance breaches.
Delayed entries make it harder to monitor client money effectively and identify discrepancies before they become significant issues.
To avoid this, firms should implement clear procedures requiring transactions to be recorded as soon as they occur.
They should also use practice management and accounting software with automated recording capabilities and regularly review accounts to ensure all transactions are up to date.
Failure to perform five-week reconciliations
The SRA Accounts Rules require firms to reconcile client accounts at least every five weeks.
Missing or delaying these reconciliations can allow errors, shortages or unauthorised transfers to go unnoticed, increasing compliance risks.
To avoid this, you should schedule reconciliations in advance and assign responsibility to a specific individual or team.
You could also use automated reminders and maintain documented evidence that reconciliations have been completed, reviewed and any discrepancies investigated promptly.
Accumulating residual client balances
Residual balances occur when small amounts of client money remain in a client account after a matter has concluded.
Allowing these funds to accumulate can indicate poor financial controls and may attract regulatory scrutiny.
To avoid this, firms should carry out regular reviews of client ledger balances, identify residual amounts quickly and take prompt action to return funds where possible.
Additionally, you should maintain a clear process for dealing with unclaimed balances in line with SRA requirements and document all efforts made to trace clients.
Vague and incomplete documents
Incomplete records, poorly described transactions or missing supporting documentation can make it difficult to demonstrate compliance during an audit or regulatory inspection.
To mitigate against this, firms should ensure all financial records include clear narratives, supporting evidence, and appropriate authorisations.
Periodic file reviews can help identify and address documentation gaps before they become compliance issues.
How can we help?
Spotting these issues as a solicitor can often be difficult. We are here to advise on any breaches or deviations that may come back to bite you when your next SAR compliance check comes.
Our accountants can help you prepare for your annual compliance report, advise on breaches and implement measures to improve the efficiency of your systems and controls.
For advice on SAR compliance, get in touch today!