Your firm’s finance function sits at the centre of your firm’s risk profile.
There are many different elements of risk, which means that it is an area ripe for improvement if you can identify those problems. Improvements in your risk profile can lead to efficiency savings, cost savings, lower PII premiums and better nights’ sleep.
See how many issues you can recognise in the following fictional account.
A day in the life of a Bloggs & Co’s finance function
Bloggs & Co is an average firm in an average town. They have a mixed client base of private individuals and businesses. They operate across three small offices. Some clients are local, and some are from other parts of the UK. [Risks around AML processes- whose responsibility is it within the firm to make sure there is compliance?]
The firm’s finance function is based in their main office. There is a senior cashier, Maureen, who has no formal qualifications, but has been with the firm ‘forever’. She has done the cashiering for thirty years and was the only one who knew the passwords for the old practice management system. [Many firms have this situation with passwords, and with one person being the only one who can make the finance processes work]
Last year the firm changed system and Maureen has struggled. [System change can prove stressful for the finance team, as the system is often chosen for reasons related to case management and we hear of cashiers receiving little training, or in some cases simply being resistant to change].
She now keeps password details on yellow stickers next to her screen. [Clear security risk, but surprisingly common] The new system is cloud based and many data reports are available, however Maureen tends to provide info to the partners using Excel spreadsheets. It can take several weeks to pull the data into her old spreadsheets but she prefers to do it that way. [Inefficient process and providing the Management Information to the partners so slowly makes the information far less useful]
The changes to the Solicitors’ Accounts Rules recently caused some stress for Maureen and for the COLP but she assured the COLP that since they had been compliant before the regulation changes, they would be compliant now. [Wrong! And from what we have seen of Maureen, are we sure she is right that they were compliant beforehand? It’s not necessarily her fault- she may have little or no knowledgeable support within the firm]
The firm hired a junior cashier six months ago to support Maureen. They advertised in the local press and the managing partner interviewed the candidates. [How did the MP assess competence as a cashier? How did the firm assess integrity?]
The new cashier is called Joe, and Maureen finds it very time consuming to train him, especially when it comes to the accounts system. She has shown him how to access the bank and make payments, as that is one area in which she can get completely swamped. [Having someone new and junior able to make payments puts the firm at huge risk of either mistakes or even internal fraud. Also, Maureen will find it difficult to train on the system as she doesn’t understand it herself.].
The fee earners email the client and office slips to Maureen and Joe, and occasionally partners come into the room with paper slips when they want to jump the queue. On a Friday they often have to field emails, visits and even telephone calls from clients chasing completions and providing information. [Huge inefficiencies here which can affect cost effectiveness and indeed service for the firm’s clients with eg delayed completions. Also, using email to communicate with the accounts department is fraught with cyber risk, especially when the team is swamped and more prone to errors]
This year the firm has of course coped with Covid restrictions. Initially their work dropped off, but there has been a huge surge of conveyancing work since July. When the first lockdown occurred, Maureen was sent to work from home, however the firm’s technology and processes didn’t work for her. Her home wifi kept crashing as she tried to set up payments. The partners who were used to giving her tasks face to face struggled to implement remote working. Supervision and ongoing training of Joe was almost impossible. When things eased the firm decided to move the finance function back into the office, seating Joe and Maureen at either end of their room. [Many firms had the same problem- working securely and efficiently away from the office is not as easy as simply sending people home with a laptop]
Today Maureen feels really tired and her coronation chicken sandwich for lunch was strangely lacking in taste. Joe seems to have an irritating cough too. [The risk of the resource within any function of a law firm becoming unwell is always there, but of course even more so at present- what if the team or key individuals need to isolate rather suddenly?]
Hopefully this article will have raised some interesting topics for discussion. Next month I will run through the ways in which these risks and problems can be mitigated and avoided.
Alex Holt, Director of Business Development