How often must a law firm reconcile its client account?

In England and Wales it depends on your regulator. Under the SRA Accounts Rules, the client bank statements, cash book and client ledger total must be agreed at least every five weeks, with the reconciliation signed off by the COFA or a manager. Under the CLC Accounts Code, bank reconciliation statements must be produced within seven days of each calendar month end, with reconciling items reviewed and cleared promptly. Either way, firms that reconcile monthly on a fixed date find the exceptions while they are still small.

These answers provide general information, not advice tailored to your circumstances. Rules can change and exceptions may apply — speak to the CASS team before making a tax, accounting or financial decision.

What the rule actually requires

Under the SRA Accounts Rules, three figures have to agree: the client bank statement balance, the client cash book balance, and the total of the individual client ledger balances. The comparison has to be done at least every five weeks, and the reconciliation has to be signed off by the COFA or a manager of the firm — reconciling it and nobody reviewing it is not compliance.

The records have to be kept, and they have to be retrievable. "We do it, but not in a form anyone could inspect" is the answer that causes trouble. These are the rules for solicitors regulated by the SRA in England and Wales.

If you are regulated by the CLC rather than the SRA

Licensed conveyancers work to the CLC Accounts Code, not the SRA Accounts Rules. The same figures have to agree, but the timing is tied to the calendar: bank reconciliation statements must be produced within seven days of each calendar month end, comparing the bank and cash book balances, listing the reconciling items and reconciling the client bank accounts to the client account listing.

Reconciling items must be reviewed and cleared promptly and a shortfall made good without delay. Review and sign-off arrangements are a firm control — commonly the Head of Finance and Administration in an ABS, or an authorised person elsewhere — and managers remain jointly and severally responsible for compliance.

In practice

The regulatory minimum is a floor, not a target. Firms that treat reconciliation as a monthly routine — same working day each month, same person, same checklist — find unpresented cheques, residual balances and mispostings while they are a five-minute fix.

The reconciliations that go wrong are almost never wrong about the bank. They are wrong about the ledgers: a receipt posted to the wrong matter, a transfer made before the bill, or a small residual balance left sitting after completion.

Common mistakes

Signing off a reconciliation with a difference "to look at next month". Differences don't improve with age, and an unexplained one is the thing an inspection will start with.

Leaving residual balances to accumulate rather than returning them promptly.

Letting the person who does the posting be the person who approves the reconciliation, so nothing is genuinely being checked.