Many legal practices have accounting year end dates of 31st December and you might now find yourself preparing your books for your accountant.
Perhaps you have an in-house bookkeeper, maybe you out-source your bookkeeping services, or you might even do all the bookkeeping work yourself. However you choose to run the accounts department of your practice, there are some essential checks and reports you should complete before you send your records to your accountant.
Engaging the services of professional legal bookkeepers such as CBS Ltd and using a powerful and efficient accounting package such as Sol-Est will significantly reduce your workoad and stress-load at your year end. Use our chat feature to find out how we can take the weight off your shoulders today!
In the meantime, lets take a look at what you need to do for your Year End Accounts
1 Ensure You Have Bank Statements for ALL Accounts
Time is of the essence when preparing your year end reconciliations – Law Society Regulations state they must be completed within 2 months of your year end date, therefore you do not want to be delayed for the sake of a bank statement.
Keeping good records of all client & office bank accounts held in the practice name and ensuring that monthly statements are issued, should ensure there is no issue in this regard, but often statements can get mislaid, or are not issued when no transactions occur. Banks can be slow to issue out of course statements or duplicated statements, so checking for missing statements and requesting them as soon as possible will prevent any delays in your accounts preparation, or worse – missed transations requiring reworking of your accounts at added expense to you!
2 Have your Cashed Client Cheques Filed in Sequence
3 Get All your postings & reconciliations up to date
If you carry out your own postings and reconciliations in house, they need to be brought up to date as soon as possible after your year end. If you outsource your bookkeeping, send all your infomation to your cashiers as soon as possible.
The quicker that postings and reconciliations are carried out, the quicker any possible issues can be identified.
You might find that a client ledger has accidentally been left overdrawn, and the sooner this is spotted and rectified the better.
Remember – the only way you can check and verify your records is to have up to date reconciliations!
4 check for debit balances on your client ledgers
Having good accounting software is essential to staying compliant. One of the most common compliance breaches is the issue of client ledgers going overdrawn. It can be a small error – perhaps a posting recorded on the wrong card, but it might also be a more significant issue, perhaps a miscalculated payment or a mis-written cheque, and this can mean you have a more serious regulation breach to deal with.
To check for Debit Balances in Sol-Est Software, you simply run a Client Balances report and tick the option to show only Overdrawn Balances. Ideally, the report will show no debit balances, but if there are ledgers requiring attention, you can ensure they are addressed quickly.
5 check for credit balances on your office ledgers
Similarly, you need to check that no office ledgers are showing credit balances. Credit balances on office ledgers can mean that a bill has not been posted, or perhaps a client to office transfer was carried out for more that what was owed.
Finding office credits quickly ensures prompt rectification and a reduced likelihood of breaches being recorded by your reporting accountant.
To check for Credit Balances in Sol-Est Software, you simply run an Aged Debtors report and tick the option to show only Credit Balances. Any ledgers identified in the report can be checked and amended.
6 carry out immeditate rectifications
7 check for long outstanding cheques
8 check for Dormant Balances
Recent Law Society Inspections have placed a significant focus on Dormant Balances. These are ledgers with funds on hand but that have had no transactions for a significant period.
On Sol-Est Software, you can quickly run a report that shows Dormant Balances for any time frame you select.
A ledger with a Dormant Balance may need urgent attention – perhaps you have money on hand to complete a property registration which has been overlooked. Perhaps you have forgotten to take across your fees or clear disbursements.
It is best practice to finalise, clear and archive matters as soon as possible after completion. A large number of small dormant balances can indicate poor bookkeeping practices and can be a red flag to an auditor!
9 Finalise your control accounts
Now that all your postings and reconciliations are complete, and you have checked and amended any issues, you are in a position to print reports needed for your accountant.
For your accountants report to the Law Society, you will be required to “prove your balances” by producing control accounts showing that your reconciliations balance to your system and that your ledger balances correspond to your bank reconciliation.
A good legal accounting software package such as Sol-Est Software will generate these reports at a click, and you can rest assured your system will always be balanced once you have posted your transactions and completed your bank reconciliations.
10 Review your practices and software for the coming year
Finally, this is a good time to review your bookkeeping practices and the effectiveness of your accounting software. Or perhaps consider purchasing accounts software if you currently use a manual system.
Here at CBS we obviously recommend using our bookkeeping services, which can be tailored to your needs and range from cashier services through to the full complement of services to include preparation of all reports needed for your accountant.
We only use Sol-Est Software – our own, custom built program specifically designed to match the needs of small to medium practices and the requirements from the Law Society. It is a powerful and intuitively designed accounting package that is both comprehensive yet simple to use. Sol-Est is available to purchase on an annual licence, or for those taking a combined CBS bookkeeping & software package, a monthly payment plan is available.