Working with clients in the legal sector comes with different requirements and challenges. Legal firms operate under strict rules, especially concerning how they handle client funds in trust accounts. While CIBA members are not permitted to perform audits, you can play a key role by helping your legal clients keep accurate records, stay compliant, and manage their finances smoothly. Here are some crucial points to keep in mind.

Helping Clients Manage Trust Accounts

Trust accounts, where client funds are held, are governed by strict regulations to protect client money and prevent conflicts of interest. Legal clients must keep these accounts separate from their business funds. Here’s how you can help:

• Accurate Record-Keeping: Make sure every transaction in the trust account is recorded and reconciled regularly to avoid errors.

• Clear Separation: Maintain a clear distinction between trust account transactions and the firm’s regular business activities to prevent any accidental mixing of funds.

• Supporting Audits: Though CIBA members don’t perform audits, preparing clean, organised records will make the audit process much easier for your clients.

Supporting Compliance with Legal Practice Rules

Legal clients are expected to follow numerous rules to remain compliant, especially those set by the Legal Practice Council (LPC). Non-compliance can lead to fines, suspensions, or other penalties. Here’s how to support your clients:

• Internal Controls: Help set up checks and controls that align with LPC rules to prevent errors and maintain compliance.

• Document Preparation: Assist clients in preparing the necessary reports and records required for compliance checks.

• Keeping Up with Regulations: Stay informed about updates in compliance requirements and notify clients of any changes to help them avoid penalties.

Providing Clear Financial Reporting

Accurate, transparent financial reporting is critical in the legal sector, not just for internal management but also to build trust with clients. By helping your legal clients keep clear, current financial records, you can ensure they meet their financial obligations effectively:

• Regular Financial Statements: Prepare statements that detail income, expenses, and trust account balances to help clients understand their financial position.

• Trust Account Reporting: Provide easy-to-understand summaries of trust account transactions to assist in fiduciary reporting.

• Budgeting and Financial Planning: Support clients in budgeting and financial planning, giving them a clearer view of cash flow and profitability.

Managing Financial and Data Security Risks

Legal firms handle highly sensitive data, which brings added responsibilities to protect client information and manage risks effectively. Here’s how you can help:

• Safe Data Practices: Educate clients on best practices for handling sensitive data, including secure storage and limited access.

• POPIA Compliance: Ensure that clients meet the requirements of the Protection of Personal Information Act (POPIA), which governs the protection of client data.

• Cybersecurity: Encourage clients to implement cybersecurity measures, such as using encrypted systems and secure passwords, to guard against data breaches.

Navigating Tax Compliance in the Legal Sector

Legal clients may face specific tax challenges, particularly regarding trust accounts and interest earned on client funds. You can add value by helping clients navigate these issues, including:

• Interest Reporting: Ensure that interest earned from trust accounts is classified and reported accurately to avoid complications.

• VAT and Income Tax Compliance: Assist in handling VAT and income tax issues specific to legal services, making sure clients meet their tax obligations.

• FICA Compliance: Support clients in meeting the requirements of the Financial Intelligence Centre Act (FICA), which includes conducting client due diligence and reporting suspicious transactions to prevent money laundering.

Adopting Technology for Efficiency and Compliance

Many legal firms are adopting new technologies to streamline operations and maintain compliance. CIBA members can help clients select and implement the right tools:

• Legal Practice Management Software: Recommend software solutions that support billing, document management, and client communications to improve efficiency.

• Automated Reporting: Suggest tools that automate transaction tracking and compliance reporting, helping clients stay organised and in line with legal requirements.

Final Takeaway

Supporting legal clients requires an understanding of their industry’s specific rules, especially around compliance and trust account management. By focusing on accurate record-keeping, proactive compliance, and efficient data management, you can help legal firms stay on track without stepping into audit roles. Your guidance and expertise are valuable in helping legal clients achieve their operational and financial goals, building trust and fostering long-term client relationships

Get access to the Accounting for Attorney Trusts August 2024 CPD here.

📢 New Webinar: Accounting for Attorney Trusts 📢
Available from: 22 August 2024
Duration: 3 CPD Points | Level: Moderate
Cost: R375 VAT Incl.

Join us for an in-depth exploration of attorney trust account management to help safeguard client funds, uphold ethical standards, and ensure regulatory compliance.

🌟 What You Will Learn:
✅ Gain a thorough understanding of managing attorney trust accounts, ensuring compliance and client trust.
✅ Discover the principles and standards governing trust accounts and the role of accountants.
✅ Learn best practices for account setup, record-keeping, reconciliation, and reporting.
✅ Discuss professional ethics, emerging trends, and the impact of technology on trust account management.

Presenter: Jako Liebenberg, CA(SA)
With extensive experience in public practice and as a registered public auditor, Jako offers valuable insights into trust account management, accounting standards, and compliance.

📅 Don’t miss out on this essential training for legal and financial professionals. Register today and enhance your skills in trust account management.