Why Law Firms Are Embracing Outsourced Finance

Law firms face mounting pressures, stricter regulation, margins and a shortage of skilled professionals. With this in mind, many firms are asking what truly needs to sit in-house and what could be delivered more effectively by a specialist partner? 

Outsourced legal finance is no longer viewed as just another back-office support function. For a growing number of firms, it is becoming a core part of their operating model. As Chris O’Day, CEO of Cashroom, explains, the shift is being driven not just by efficiency, but by resilience, compliance confidence, and long-term strategic thinking. 

Q. We’re seeing huge shifts in how law firms run their operations. From your perspective, what’s driving the growing move towards outsourcing legal finance, and why is it becoming such an integral part of a modern firm’s setup?

A. If you strip it back, three things are driving it: regulation, margin pressure, and talent. 

Regulation around client money, reporting and audit has only become more demanding.  Regulators quite rightly expect firms to have tight controls, clear records and robust oversight of client funds. That’s hard to deliver consistently if you’re relying on one or two overstretched people in a back office. 

At the same time, most firms are under pressure to protect margin while improving client service. Partners are asking: “What genuinely has to be done in-house, and what can be delivered better by a specialist?” Legal finance is a natural candidate for that question. It’s essential, but it isn’t something clients see as a point of differentiation. If you can improve quality, resilience and cost all at once by outsourcing, it becomes a very sensible business decision. 

The third driver is people. There’s a real shortage of experienced legal cashiers, and firms struggle to recruit and retain the calibre of finance staff they need, especially outside major cities. Outsourcing gives access to a deeper pool of specialist expertise without the recruitment risk. 

For many modern firms, outsourced finance is now part of the core operating model. It gives them a finance function that looks and feels like an inhouse team, but with scale, cover, technology and compliance baked in. That frees partners to focus on strategy, client relationships and legal work, rather than worrying whether yesterday’s client account reconciliations were done. 

Q. Client-money handling is under more scrutiny than ever. How does The Cashroom help firms feel more confident about their compliance, accuracy, and audit readiness? And why is having an independent specialist so important in getting this right?

A. Client money is the thing that keeps most managing partners awake at night, and understandably so. The consequences of getting it wrong can be severe: regulatory sanctions, reputational damage, and in extreme cases, the loss of a practice.

Our starting point is to build a finance environment that is boringly predictable: daily reconciliations, segregation of duties, robust approval workflows, and a clear audit trail for every movement of client funds. Because we work with over 300 firms, we’ve seen almost every scenario, from sole practitioners and small high-street firms, through to high-volume conveyancing practices and large multi-office firms with complex structures. That experience flows into our processes and our portal. 

We design our controls around the relevant accounts’ rules – SRA, CLC, Law Society of Scotland and others and we keep a close eye on new guidance and thematic reviews. When something changes, we update the process once, and every client benefits. That’s hard for a single firm to replicate on its own. 

Independence is crucial. An external specialist brings separation between fee-earners asking for payments and the people authorising and processing them. Our teams are trained to challenge, ask for the right evidence, and say “no” or “not yet” where something doesn’t meet the standard. That constructive friction is a big part of good client-money governance.  

By the time an auditor arrives, everything they need is there; reconciliations, reports, approvals and notes, all in one secure system. For our clients, audits become less of a stressful event and more of a confirmation that the control environment is doing what it should. 

From Cost to Competitive Advantage 

This isn’t just a cost conversation. It’s about risk, control and sustainability. Firms remain responsible for their client money and regulatory compliance, that never changes. But how that responsibility is operationally delivered is evolving. The firms that are building finance functions that are structured and properly resourced, are the firms that are ready for audit at any time, not just when the auditor is due. 

With an increase in scrutiny and commercial pressure, “boringly predictable” finance processes are not a luxury. They are a competitive advantage. Outsourced legal finance is no longer a peripheral support service. For successful modern law firms, it is part of the foundation on which their sustainable growth has been built. 

About Chris O’Day

Chris O’Day is a Chartered Accountant, having qualified at Deloitte and has had a significant impact at Cashroom over the years since joining in 2014. After joining Cashroom as a Management Accountant, his extensive experience in legal accounting saw him become Cashroom’s Client Services Director in 2017 – gaining significant insight as to what is valuable to clients and to the legal industry, before taking on the CEO role in 2021 to drive the next phase of Cashroom’s growth. 

Chris finds endless opportunities and has a key focus on challenging the status quo in order to drive continuous improvement across the business and the services Cashroom provide to the Legal Sector. Chris believes that being client-centric is key to any service business – understanding what lawyers want and need and ensuring Cashroom deliver the best customer experience that is efficient, compliant and risk-free.

Learn how Cashroom can help your firm build a finance function that’s both secure and scalable.