Partners must identify and address shortcomings in the accounts departments of their law firms to keep their businesses afloat, says Barry Hilton

Recent economic recessions have forced law firms to become increasingly aware that the term 'legal business' can no longer merely be a phrase that leaves an unpleasant taste in the mouth.

And yet, with more than 50 years' experience of working 'below stairs' in the finance departments of numerous law firms, I have cause to wonder whether the penny has still to drop in the minds of many partners.

It is normal practice in the majority of even small limited companies to have the day-to-day company finances handled by someone who has had formal training in the dos and don'ts of lawful accounting practice, and who has earned recognised qualifications to demonstrate their competence.

So why is this not true of many professional firms?

This is even more remarkable when one considers that, unlike most limited companies, solicitors handle huge amounts of clients' money.

These days the cost of non-compliance with the Solicitors Accounts Rules can be crippling, so why do otherwise sane professionals take risks by not ensuring their accounts staff have formal, ongoing training in the changing requirements of those rules?

In bygone days, many partners viewed their accounts department only as a necessity, an unpleasant expense.

It was not fee earning and was therefore simply a cost to the firm.

Management information was not required because solicitors practised law and often did not discuss money with their clients.

Often the solicitor would undertake a considerable amount of work without discussing costs, only to find that the client would not, and did not, pay a fee sufficient even to cover the cost of dealing with the matter.

In many cases, 'management information' was maintained on the back of an envelope such as costs to date, balance at bank.

I was conducting an accounts course only a short while ago when a sole practitioner produced for me her 'management information'.

It matched exactly with the above - and this is the 21st century.

How different things are today from the good old days.

Today, many outsiders make official visits to the accounts department to verify the accuracy of firms' finances - accountants, representatives from the Legal Services Commission, the Inland Revenue, and HM Customs & Excise, to name but a few.

There are also various 'quality marks' that require auditing to ensure compliance.

Within the next few years, be prepared for a regular Law Society monitoring visit to check for compliance.

Of course, modern accounts departments do prepare, and advise on, management information, which helps a practice remain in business.

Partners, like any other business owners, need to be able to see where the firm stands.

With properly trained staff, this can be done regularly by careful use of budgets and cash flow analyses.

The Institute of Legal Cashiers and Accountants provides training on all aspects of the Solicitors Accounts Rules with accreditation at diploma, associate and fellow standards.

Its courses are not aimed solely at accounting staff, but also at qualified fee earning staff.

Paragraph 2.2 of appendix 3 to the 1998 rules says: 'The firm should hold a copy of the current version of the Solicitors Accounts Rules.

The person who maintains the books of account must have a full knowledge of the requirements of the rules and the accounting requirements of solicitors' firms'.

Can you prove that to be true of your firm?

Barry Hilton is the honorary president of the Institute of Legal Cashiers and Accountants