Financial management 2019—law firms
Produced in partnership with DG Legal
Financial management 2019—law firms

The following Practice Compliance practice note produced in partnership with DG Legal provides comprehensive and up to date legal information covering:

  • Financial management 2019—law firms
  • The duty to monitor financial stability and business viability
  • Reporting to the SRA
  • Who should be responsible for financial management?
  • Financial management policy
  • Common financial risk tools
  • Annual budget
  • Variance analysis against budget
  • Cashflow forecast
  • Cashflow forecast variance analysis
  • More...

Financial management 2019—law firms

This Practice Note provides guidance on managing financial risk. It reflects the SRA Standards and Regulations 2019 and additional financial management requirements that apply to Lexcel accredited firms. It also provides guidance on common financial risk tools.

The duty to monitor financial stability and business viability

You must:

  1. actively monitor your financial stability and business viability—once you are aware that you will cease to operate, you effect the orderly wind-down of your activities

  2. identify, monitor and manage all material risks to your business, including those which may arise from your connected practices

The SRA does not provide guidance about how you should achieve this.

In practice, the amount of resource expended on managing financial risk will vary from firm to firm and will depend on many factors such as the size of the firm and the degree to which it is presently financially stable. For instance, a firm that is heavily dependent on bank borrowings may invest significant resources to implement financial risk systems that are monitored at regular intervals. Other firms may be content to spend less time on financial risk systems on the basis of, for example, relative financial stability.

Reporting to the SRA

You must notify the SRA promptly:

  1. of any indicators of serious financial difficulty relating to your firm

  2. if a relevant insolvency event occurs in relation to your firm

  3. if you

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