What does an accountant for solicitors actually do?

Accountants who work with solicitors do far more than prepare annual accounts and tax returns. They understand the unique financial regulations of the legal industry and help firms navigate everything from client money compliance to cash flow and growth strategies. Their role is a blend of compliance, financial management, and strategic guidance.

Understanding the solicitor–accountant relationship

Law firms operate under the SRA Accounts Rules, which set out how client money must be held, managed, and recorded. Failure to comply can lead to penalties or even disciplinary action. Accountants specialising in legal sector finance ensure firms follow these rules while also managing tax and business performance efficiently.

They work closely with a firm’s Compliance Officer for Finance and Administration (COFA) and often become an ongoing financial partner rather than an occasional consultant.

Key responsibilities of an accountant for solicitors

1. Ensuring SRA compliance

The most important responsibility of an accountant for solicitors is to ensure the firm complies with the SRA Accounts Rules. They:

• Review client and office account reconciliations.

• Verify that client money is held correctly and separate from the firm’s funds.

• Check breach logs and compliance records.

• Prepare and submit the annual SRA Accountant’s Report, which confirms the firm’s compliance status.

By identifying errors early, accountants help solicitors avoid disciplinary action and maintain the trust of clients and regulators.

2. Managing client money systems

Accountants set up and oversee systems to record and reconcile client money accurately. They ensure transactions are posted correctly, client balances are up to date, and funds are transferred in accordance with the rules.

They also review interest calculations, timing of transfers, and disbursement handling to confirm that no client money is misused.

3. Preparing accounts and tax returns

Solicitors structured as limited companies must file annual accounts and Corporation Tax returns with HMRC. Accountants prepare these documents in line with legal accounting standards and ensure all allowable deductions are claimed.

For partnerships and sole practitioners, accountants manage Self Assessment tax returns and partnership accounts, ensuring all profits are reported accurately and on time.

They also handle VAT returns, payroll processing, and Making Tax Digital submissions.

4. Advising on tax efficiency

Tax planning is another key area. Accountants help solicitor firms:

• Structure remuneration between salary, dividends, or profit share efficiently.

• Plan for Corporation Tax or Income Tax payments.

• Claim capital allowances for equipment and technology.

• Manage pension contributions and director payments tax-effectively.

They make sure firms meet tax deadlines while minimising liabilities within the law.

5. Supporting business growth and profitability

Beyond compliance, accountants provide valuable commercial advice. They analyse financial data to identify profit margins, cost inefficiencies, and growth opportunities.

By producing management accounts and cash flow forecasts, they help partners make informed decisions about hiring, pricing, and expansion. Many accountants also assist with budgeting, funding applications, and performance benchmarking against other law firms.

6. Implementing digital accounting systems

Modern law firms must keep digital records under both HMRC’s Making Tax Digital (MTD) initiative and the SRA’s transparency requirements. Accountants help firms transition from manual bookkeeping to cloud-based systems such as Xero, QuickBooks, or Sage integrated with practice management software like LEAP or Clio.

They set up digital bank feeds, automate reconciliations, and train staff to use the system properly. This ensures the firm’s accounts remain accurate, secure, and compliant.

7. Preparing SRA Accountant’s Reports

Every law firm that holds client money must have an independent accountant review its records each year. The accountant checks whether the firm has complied with the SRA Accounts Rules and prepares an Accountant’s Report to submit to the SRA.

If the report is qualified (meaning breaches are found), the firm may face regulatory scrutiny. A proactive accountant helps prevent this by identifying and fixing issues before the annual review.

8. Providing audit and assurance services

Some larger solicitor firms require a formal audit due to turnover or client requirements. Specialist accountants perform these audits in accordance with professional standards, ensuring transparency and accuracy in financial reporting.

Audits also help uncover risks such as fraud, errors, or system weaknesses, giving partners confidence in their financial controls.

9. Supporting the COFA

The COFA (Compliance Officer for Finance and Administration) is responsible for ensuring the firm meets its financial compliance duties. Accountants provide crucial support to the COFA by:

• Conducting internal reviews.

• Advising on breach reporting.

• Monitoring reconciliations and client money movements.

• Offering guidance on updates to the SRA Accounts Rules.

This partnership helps maintain a culture of compliance and accountability within the firm.

10. Providing regular financial reporting

Accountants produce management reports showing performance trends, profitability, and cash flow. These reports give partners and managers a clear view of the firm’s financial health and support better decision making.

Regular reporting also highlights problems early, such as rising overheads, declining revenue, or uncollected fees, allowing firms to take corrective action quickly.

Why solicitors need specialist accountants

While a general accountant can handle basic bookkeeping, solicitors benefit from working with accountants who understand the SRA’s unique regulatory environment. Legal sector accountants know how to:

• Handle client and office accounts correctly.

• Interpret the SRA Accounts Rules accurately.

• Communicate with the SRA and respond to queries.

• Manage compliance during growth or mergers.

This expertise reduces the risk of regulatory breaches and ensures smooth financial management tailored to the legal industry.

Example in practice

A small conveyancing firm was struggling with late reconciliations and unclear client ledger balances. Their accountant introduced legal-specific accounting software, set up proper segregation between client and office money, and implemented monthly management reports.

Within a few months, the firm achieved full SRA compliance, improved cash flow tracking, and reduced administrative workload. The accountant also helped the partners plan for upcoming Corporation Tax liabilities, avoiding unexpected payments.

The value of ongoing accounting support

Working with an accountant is not just about compliance once a year. Regular involvement helps solicitors maintain consistent financial control and long-term stability. Accountants provide insights into profitability, assist with tax planning, and ensure that financial operations evolve as regulations and technology change.

Their input also gives partners peace of mind that the firm’s finances are compliant, efficient, and strategically aligned with business goals.

Conclusion

An accountant for solicitors does far more than prepare tax returns. They are compliance specialists, financial advisers, and strategic partners who help law firms manage client money, meet SRA requirements, and optimise profitability.

By working closely with an experienced accountant, solicitors can protect their reputation, improve efficiency, and build a financially resilient practice ready for the future.