How Can an Accountant Help New Solicitors Set Up a Compliant Practice

Compliance sits at the heart of every law firm’s operations. The SRA Accounts Rules require solicitors to keep client money safe, maintain accurate records, and report any breaches promptly. Non-compliance can lead to disciplinary action, fines, or even loss of authorisation.

New solicitors often underestimate how much financial structure is needed to meet these obligations. Working with an accountant who understands the SRA framework ensures your systems are set up correctly from the start, reducing the risk of costly mistakes later.

Registering the Business and Choosing the Right Structure

One of the first decisions for any new solicitor is selecting the right legal and business structure. An accountant can help you evaluate whether to operate as:

• A sole practitioner.

• A partnership or limited liability partnership (LLP).

• A limited company.

Each structure has different tax, liability, and regulatory implications. For example, a limited company may provide better protection for personal assets and more flexible tax planning, while an LLP offers partnership-style management but with limited liability.

Your accountant will handle company registration with Companies House, set up your HMRC accounts for Corporation Tax, PAYE, and VAT (if applicable), and ensure your structure aligns with SRA requirements.

Setting Up Client and Office Accounts

A solicitor must operate a client account that meets SRA rules. This account is used exclusively for holding client funds, separate from the firm’s operating or office account. The setup must ensure that:

• Client money is kept separate from business funds.

• Transactions are recorded accurately and reconciled regularly.

• Proper controls exist for authorising and monitoring payments.

An accountant can assist in choosing appropriate banking arrangements, implementing software that supports client account management, and establishing internal controls. They can also train your team on maintaining ledgers and reconciling accounts in line with SRA guidance.

Implementing Accounting and Practice Management Systems

Modern law firms rely heavily on accounting and practice management software to stay compliant and efficient. An accountant can help you:

• Select and configure SRA-compliant accounting software such as LEAP, Clio, or Xero for Solicitors.

• Integrate time recording, billing, and case management systems.

• Set up digital record keeping to comply with Making Tax Digital (MTD).

• Automate reconciliation between client ledgers and bank statements.

Using the right systems reduces administrative burden and helps ensure you meet regulatory and tax reporting deadlines accurately.

Advising on Tax, VAT, and Payroll

Tax compliance is another crucial area where an accountant adds value. They can help you:

• Register for VAT and choose the most appropriate VAT scheme for your firm.

• Calculate and manage Corporation Tax or Income Tax liabilities.

• Set up and manage PAYE payroll for yourself and your staff.

• Implement expense policies and ensure accurate tax deductions.

For law firms, VAT on disbursements can be complex, especially when deciding whether to treat costs as client or firm expenses. An accountant familiar with legal sector VAT rules can help you avoid common errors.

Preparing for SRA Compliance Reviews

An accountant with experience in the legal sector understands the SRA Accounts Rules and can help you prepare for regulatory reviews or audits. They will:

• Establish financial systems that comply with SRA record-keeping requirements.

• Perform periodic internal reviews to check for compliance issues.

• Identify and correct potential breaches before they escalate.

• Prepare your firm for the annual accountant’s report required by the SRA if you hold client money.

They can also work with your SRA-approved reporting accountant to ensure the annual submission is accurate and timely.

Cash Flow and Budget Planning

Strong cash flow management is critical for a new legal practice. Solicitors often face high start-up costs, including insurance, staffing, software, and professional indemnity cover. An accountant helps you create a detailed cash flow forecast to manage these expenses while maintaining profitability.

They can also help with:

• Setting appropriate charge-out rates and fee structures.

• Tracking billable hours versus collections.

• Managing work-in-progress (WIP) and aged debtors.

• Forecasting tax and VAT payments to avoid shortfalls.

By establishing realistic budgets and monitoring them regularly, your accountant ensures financial stability as your practice grows.

Assistance with Payroll and Pensions

If your practice employs staff, you will need to comply with payroll and auto-enrolment pension obligations. An accountant can manage this on your behalf by:

• Setting up PAYE with HMRC.

• Running monthly payroll and issuing payslips.

• Calculating tax, National Insurance, and pension contributions.

• Submitting Real Time Information (RTI) reports to HMRC.

This ensures your practice stays compliant with employment tax legislation while freeing up time to focus on client work.

Business Planning and Growth Strategy

An accountant is more than a compliance partner they can also act as a strategic advisor. For a new solicitor, they can help develop a business plan that includes financial projections, growth goals, and profitability analysis.

They can also advise on:

• Funding options for start-up costs.

• Tax-efficient remuneration strategies for partners or directors.

• Expansion planning, such as opening additional offices or hiring new staff.

• Benchmarking performance against other law firms of similar size.

With a well-structured financial plan, you can make informed decisions about your firm’s direction and long-term sustainability.

Ongoing Support and SRA Reporting

Once your firm is up and running, your accountant continues to play a key role in ensuring ongoing compliance. They will:

• Produce monthly management accounts and annual financial statements.

• Submit VAT and tax returns on time.

• Ensure payroll and pension submissions are accurate.

• Review your compliance with SRA Accounts Rules on an ongoing basis.

If issues arise, they can work with you to resolve them quickly and communicate with the SRA if necessary.

Choosing the Right Accountant for Your Law Firm

When selecting an accountant for your legal practice, it is important to choose one who:

• Is familiar with the SRA Accounts Rules and solicitor reporting requirements.

• Holds a practising certificate from a recognised professional body (such as ICAEW or ACCA).

• Has experience working with law firms or legal service providers.

• Offers proactive advice, not just basic bookkeeping.

An accountant who specialises in the legal sector understands the unique challenges of running a compliant practice and can tailor their services accordingly.

Summary

An accountant plays a vital role in helping new solicitors set up a compliant and financially sound legal practice. They assist with choosing the right business structure, setting up client accounts, installing SRA-compliant systems, managing tax and payroll, and preparing for annual accountant’s reports.

By partnering with an experienced accountant who understands the legal sector, new solicitors can ensure full compliance with SRA rules, maintain accurate financial records, and focus on delivering excellent client service from day one.