Financial Management Policy (Dec25)

Introduction

This firm is committed to efficient and prudent long-term financial management.

In particular, it is the policy of the firm to base financial decisions (such as decisions about profit distributions, levels of drawings and bonuses and the valuation of capital) on cash recovered rather than on work in progress (WIP) or billings.

Purpose

This policy aims to inform everyone at the firm about how finances should be managed and the procedures that must be followed.

Scope

This policy is mandatory reading for all staff involved in financial matters, particularly partners, fee earners and members of the finance team. Any serious or repeated failure to adhere to the policy may be treated as gross misconduct and dealt with in accordance with the firm’s disciplinary procedures.

Responsibility

Nicola Robinson (Finance Director and COFA) has overall responsibility for this policy and has responsibility for compliance with the SRA Accounts Rules.

Individual fee earners are responsible for the profitable management of the matters they handle or supervise.

If you have concerns about any aspect of financial management, especially concerns related to client money, you must refer them to the COFA immediately.

The responsibilities of the Finance Director include conducting an annual documented review of this policy to ensure that it is in effective operation across the firm and reporting thereon to a directors’ meeting.

Firm matters

All directors of the firm are required to play their part in the efficient and prudent financial management of the firm.

In particular, directors are expected to:

• set a good example, such as ensuring time recording is carried out and keeping reviews and control of WIP and debts.
• supervise and manage others to secure good financial performance.

Procedures

Accounting system

The firm has a centralised accounting system which is provided by ALB. As required by the SRA Accounts Rules, reasonable enquiries have been made to ensure the system is compliant with the Rules. This included ensuring the system is appropriate to the nature and volume of client transactions which we deal with and the amount of client money.

All staff at the firm have enquiry access to client accounting and time recording data. In addition, some staff have access to the nominal ledger and some of the management reporting facilities. Apart from time recording entries, only Nicola Robinson, Timothy Halliday & Claire Gregory have password-protected access to the various posting programmes.

It is the responsibility of the COFA to ensure that all those with access to the accounting system receive (normally as part of the induction process) appropriate training on the system’s operation and the relevant provisions of the SRA Accounts Rules.

Time recording

The firm operates an electronic time recording system using ALB. Time is recorded in six-minute units with each unit being costed at the charge rate applicable at the time.

Billing procedure

Credit limits

The firm does not have a set policy on credit limits as we rely on cost estimates and updates to keep clients informed. We also set out the intended pattern of billing in our client care documents.

We are very conscious not to let our costs get out of control and to ensure that clients are billed regularly for their legal work.

Money on account

Wherever possible, money on account of our costs and disbursements should be obtained from the client.

The firm accepts card payments up to the value of £500. Please see our Accepting, Storing & Processing Cardholder Data Policy.

Interim bills

To assist cash flow, and where appropriate, interim bills should be raised in line with the pattern of billing agreed with the client at the outset of the matter. Smaller and regular bills are less likely to be the subject of non-payment. Where this does arise consideration may need to be given as to whether to continue to act for the client.

Responsibility

Individual fee earners are responsible for preparing their own bills which should be rendered within a reasonable time of concluding the matter. The bill should be sufficiently detailed for the client to be able to identify what it relates to.

Once prepared, the bill should be signed by the solicitor (or on their behalf by an employee of the solicitor authorised by them to sign).

Billing information

The following information should appear on your bills:

• You must pay this bill within one month. We may charge you interest on any overdue amount; as well as your right to complain about our bill under our complaint’s procedure, you can also apply for the bill to be assessed by the court under Part III of the Solicitors Act 1974.
• payment can be made direct to our bank account: [insert banking details]. If paying direct to our bank, please quote reference [insert instruction to use matter number or bill number].

Any disbursements in the bill which have been incurred but have not yet been paid must be identified.

Debt management

The Accounts Department will produce an aged-debt report on a monthly basis in respect of unpaid bills which will be distributed at the monthly Fee Earners meeting.

The firm’s credit control procedures are as follows:

Stage 1

If a bill remains unpaid for more than 28 days, a reminder will be sent to the client by the fee earner responsible for the file.

Throughout the process set out at stages 2 – 5, below, our Accounts Department will keep the fee earner, who is responsible for the file, updated. The fee earner responsible for the file must consider, at each stage, whether it is appropriate for them to continue acting for the client (if the matter has not already concluded).

Stage 2

If, despite the reminder, the bill remains outstanding after two months, the debt will be pro-actively pursued by the Accounts Department, who will proceed as follows:

• make telephone contact with the client; and
• agree a date by which the bill will be paid; or
• if the Accounts Department cannot make contact, via the telephone, they will issue a formal letter asking for payment within 14 days and enclose a copy of the outstanding bill; and
• diarise the matter for a further chase-up call, if necessary.

Stage 3

If the bill remains unpaid beyond the agreed payment date (arranged at Stage 2), the firm’s Directors will consider whether legal action should be taken to recover the outstanding monies.

Stage 4

If it is considered that legal action should be pursued, a director will send the client a letter threatening court proceedings if payment is not made within a further 14 days.

At this stage, it would not normally be appropriate for fee earners to conduct any further work on the file.

Stage 5

If payment has still not been received by the due date, or alternative payment arrangements agreed with the client, a final letter will be sent to the client stating that court proceedings are being taken. The firm’s management team will pursue this step as soon as is practicable thereafter.

Management systems and supervision

Ongoing procedures

Payments, out of the client account, whether by cheque or bank transfer, can only be authorised by a director. This includes transfers from client to office account.

Requests for payments from the client account usually involve the payment of disbursements such as court fees or counsel fees and should be requested by email and supported by the relevant invoice where possible. A copy of the request and the invoice should be kept on the matter file.

Cheques and requested by the chit requisition system on ALB and are authorised by a director.

No accounting documents, including authorisation forms and cheques, may be amended in any way or for any reason. If a cheque needs to be amended, it must be returned to the Accounts Department so that it can be cancelled, and a new cheque issued.

Cheques received must be passed to the Accounts Department so that they may be entered into the paying in book, entered on the accounts system, and paid into the bank.

Cheques should be banked promptly to comply with the SRA Accounts Rules.

Payment out of client monies

Where mixed payments are placed in a client account, all business money and/or out of scope money must be transferred out of the client account promptly.

Money can only be transferred in specific circumstances, the most common being:

• required for a payment to or on behalf of the client.
• properly required for payment of a disbursement on behalf of the client; or
• properly required in full or partial reimbursement of money spent by the firm on behalf of the client.

Client money must be returned to the client (or other person on whose behalf the money is held) promptly as soon as there is no longer any proper reason to retain those funds.

Payments received after the fee earner has already accounted to the client, for example by way of refund, must be paid to the client promptly.

In the rare event that any client money is retained at the end of the substantial conclusion of a matter the client must be informed promptly, in writing, of the amount retained and the reason for that retention. Thereafter, the client must be informed at least annually of the monies held and the reason for the retention, for as long as the monies continue to be held.

Transfers

A bill or other written notification to the client must be given when payment for fees is required from client money.

Having given notice to the client, the amount must be transferred to the business account promptly.

The proper transferring of monies is directly the responsibility of the relevant fee earner and our Accounts Department.

Cleared funds – payments made.

Money is deemed “spent” when a cheque is issued, or a transfer request is made to our bank. The same money cannot be paid again, even if the cheque has not been cashed. A cheque which is not going to be cashed must be returned and destroyed or otherwise stopped.

Cleared funds – payments received.

Payment should not be made from the client account until cleared funds are available. Therefore, until a cheque clears, or an electronic payment is actually received, we must not make a payment out of those funds unless authorised by a director.

Disbursements

Where bills include disbursements, they should reflect the actual amount spent or to be spent.

All disbursements must be recorded both on the accounting system and also on the client’s file.

Disbursements may not be paid out of the business account unless they have been authorised and, wherever possible, clients should fund the cost of disbursements in advance. If this is not possible or payment is not guaranteed, the position must be checked with our Accounts Department before any disbursement is paid.

VAT

On billing, we must charge VAT on everything which is not a true disbursement, but which is part of our own overall supply of legal services to the client. Charges which are always subject to VAT include telegraphic transfer processing and client due diligence charges.

On the other hand, we should not charge VAT on true disbursements such as court fees, Land Registry fees, and (generally) the cost of medical reports or other fees of independent professionals.

If you are in unsure whether you should bill with VAT on a particular item, ask our Accounts Department.

Write-offs

The write-off of any balance in respect of costs or disbursements must be authorised by Timothy Halliday.

Accounting to the client for interest

A sum of interest must be accounted to the client where it is fair and reasonable to do so, in accordance with the SRA Accounts Rules and our interest policy.

Our interest policy seeks to provide a fair outcome for both us and the client. Our interest policy is set out in the terms of business issued to clients at the start of a matter (unless standing terms apply).

We will keep our policy under review as to what is fair and reasonable in the circumstances and the policy may change if the Bank of England base rate increases or decreases.

For clients whose cleared funds are paid into a general client account, we will account for a sum in lieu of interest unless the amount of interest calculated on the balance held is less than £50 or the funds are held for a week or less.

We will usually account to the client for interest at the conclusion of the client’s matter unless it is deemed more appropriate to account to the client at intervals throughout.

File closing

Where a file is to be closed, the accounts system must be checked to ensure that there is no outstanding time balance and that bills have been prepared, delivered, and paid. Checks must also be made to ensure that no monies are held in the client account and that there is no outstanding interest to be paid.

The account can then be closed, and the information held for a minimum of six years in line with the SRA Accounts Rules.

Funds remaining in the client account after conclusion of the matter.

There may be instances in which there are still funds in the client account and attempts to return the money have failed because contact has been lost with the client. Where the amount is £500 or less and, once the prescribed circumstances set down by the SRA have been satisfied, the money will be paid to our chosen charity and a written record of the process and payment maintained.

If the amount is in excess of £500, the matter should be referred to the COFA as a request for disposal will have to be made to the SRA. The SRA will require evidence of the steps already taken to locate the client and will assess various other relevant factors, including:

• the amount of money and the length of time it has been held by the firm.
• the costs involved in making further enquiries.
• the likelihood of success of tracing the client or third party given the information held; and
• the proposed use to be made of the money, for example to be paid to charity or transferred to the firm’s business account.

Where it is not possible for the SRA to authorise a withdrawal, for example where the client is now a dissolved company or where the firm is acting as an executor in an estate matter, guidance will be given as to the appropriate next steps for the firm to take.

Adherence to these procedures is supervised by the directors, in general, and the Finance Director/COFA in particular, to ensure that they are well understood and complied with throughout the practice.

Annual procedures

The firm draws up the following on an annual basis:

• financial statements for the past financial year, including a profit and loss account and balance sheet.
• a budget for the next 12 months including estimates of the following:
• chargeable hours.
• WIP
• fees billed.
• cash collected from clients.
• salaries
• rent, occupancy costs, insurance, and other major expense categories.
• a cash flow projection for the next 12 months; and
• a financial risk assessment, including risks relating to:
• the firm’s overdraft facility being called in or being insufficient for the firm’s needs.
• any over-reliance on one client or source of work.
• the possible departure of partners; and
• the impact of possible claims.
• any impact of remote or hybrid working patterns on the firm’s record keeping, formats and audit trails.

Compliance checks

The COFA has access to all the firm’s accounting records and is responsible for verifying that the systems and controls in place for financial management are operating effectively.

The COFA completes a monthly financial audit on one file from each fee earner. These checks include:

• Do all transaction relate to the file in question.
• Are the entries in chronological order?
• Do the narratives provide adequate information?
• Check for credit balances on the office ledger.
• Is the file tidy and in good order?
• Have money laundering checks been carried out?
• Check every transaction on the ledger is justifiable and agreed to evidence on the file.
• Investigate/obtain explanation for ledger entries not referred to in client file and vice versa.
• Confirm dates of transactions on the ledger are recorded accurately.
• Do all client account payments adhere with rule 3.3 and rule 5.1?
• Ensure the client ledger has not been overdrawn.
• Office and client money clearly identified when received and banked into the correct bank account.
• Ensure office to client transfers are justifiable and in accordance with the SRA rules and not rectifying a breach.
• Ensure client to office transfers are justifiable and in accordance with the SRA rules.
• All client to client transfer qualifies as proper payments and receipts under the SRA rules.
• Ensure client money is returned promptly to the client on conclusion of the matter.
• Where funds have been retained ensure that at least every 12 months client is informed of amount and reason for retention.

Other verification checks include:

• Comparing a sample of transactions into and out of client account as they appear on the bank/building society statements with the records of receipts and payment of client money, including cheques and paying in records.
• Confirming satisfactory client account reconciliations have been undertaken on all client accounts within the required timescales.
• Random checks to ensure that the interest policy has been applied consistently.
• Random checks of business ledgers, business cash accounts and bank statements to identify whether client money has been paid into our business account.
• Random checks that postings to ledger accounts are in a chronological order and that they adequately reflect the payer or payee and that the balance on the ledger can be easily ascertained.
• Random checks of the client ledger accounts and management information for aged balances requiring attention; and
• Random checking to verify that banking facilities are not being provided to clients.

The outcome of these reviews will be recorded on a compliance monitoring report and any breaches will be recorded in the Access breach module and reported on in the monthly COLP & COFA meeting. Any urgent issues will be addressed immediately, and a material breach report to the SRA as required.

Mergers

If the firm considers a merger, thorough financial due diligence will be undertaken, on the other party, in conjunction with the firm’s accountants.

This will include consideration of:

• the last three years’ accounts including profit and loss and balance sheets.
• WIP and debtor profile.
• creditors, including HMRC; and
• contingent liabilities such as PII cover and run off costs, outstanding claims and notifications and other potential litigation.

Client protection

If the firm were to find itself facing financial difficulty, it would put in place plans for the protection of clients’ interests. Those plans may include approaching other firms with a view to merger or the transfer of work on an orderly basis to those other firms. The firm is aware that any financial difficulties must be reported to the SRA and, following making an appropriate report, the firm would work with the SRA to bring about an orderly wind down of the business.

Currently, there is considered to be no prospect of financial difficulty and so no such approaches have been made.

Review of this policy

This policy will be reviewed at least annually by Nicola Robinson (Finance Director/COFA).

Dec 2025