The hidden risks in legal finance: Why manual processes are no longer viable

Law firms are lagging behind other industries in digitalisation, especially when it comes to their finance operations. The OneAdvanced Legal Trends Report 2025 reveals that 60% of law firms plan to upgrade their digital systems this year. Whist many firms acknowledge they are behind the curve, there is growing recognition from the firms that technology is key to maintaining competitive advantage and reducing operational costs. With client expectations at an all-time high, firms must not only deliver an excellent service but also ensure the secure handling of their accounts and funds. 

Outdated systems and manual processes remain the norm across legal finance. Long-standing firms have legacy systems entrenched in their day-to-day operations, and finance transformation can bring huge change and disruption if not handled in the right way. Why fix something that isn’t broken? 

However, in 2025, firms that don’t digitise may risk falling behind. These outdated systems and processes don’t just slow operations—they expose firms to fraud and compliance risks. The SRA has noted that the rise of financial fraud, and costly errors can seriously harm a firm’s reputation.  

The SRA has noted that the rise of financial fraud and costly errors can seriously harm a firm’s reputation. In their 2023/24 anti-money laundering (AML) report, the SRA emphasises this point by highlighting common compliance issues: 

“Of the 118 firms found not to be compliant, the most common breaches were failures to: carry out client and/or matter risk assessments, have a compliant firm-wide risk assessment, have adequate AML policies, controls and procedures, carry out staff training, adequately identify and verify clients at the outset, assess and identify client or matter risks, carry out ongoing monitoring of transactions, carry out source of funds checks” 

In an industry managing millions in client funds daily, firms must ask themselves: how sustainable is this approach? 

The root cause: Lack of bank connectivity 

Most legal finance teams use Practice Management Systems (PMS) to manage financial data, including client account transactions, supplier payments, and payroll. However, these systems lack a direct connection to their bank accounts.  Without PMS-to-bank connectivity, finance teams must rely on teams of cashiers and finance which is ultimately a manual process—leading to inefficiencies, increased fraud risk, and challenges with compliance.  Read more about the case for PMS-Bank integration in our whitepaper here. 

 

The operational burden of manual payments 

Manually processing payments means cashiers logging into bank portals, uploading files (which may or may not be compatible), or even keying in payments line by line. As firms handle multiple client accounts, and potentially even multiple banks with different logins, this creates a significant operational burden.  One UK Top 20 Law firm reported to us that using a manual process, they took an average of seven minutes to process a single client transaction—now after automating this and connecting their PMS directly to the bank it takes under a minute. Over thousands of transactions per month, you can imagine how this time loss multiples.   The approvals process for these client payments also adds delays, as finance teams chase partners for sign-off. As partners working on cases and developing the firm and not constantly available for sign off, payments can stall which not only frustrate clients for delayed work but consume billable hours for the firm.   Napthens’ a law firm with around 300 people based in the Northwest, previous before automating involved up to six individuals, all with competing priorities. This sometimes meant that a single payment sometimes taking hours due to needing to ring for approvals, manual checks, data entry, and authorisations. As firms grow, transaction volumes rise, amplifying these inefficiencies. 

 

The challenges of manual reconciliation 

Reconciling statements, whether you do it weekly or monthly, requires your cashiering team to log into multiple bank portals, download and reformat your data sto compare it against both internal trust and client trust ledgers and ensure every bank statement aligns with your client trust records. With 88% of spreadsheets containing errors, the risks of this error prone and time-consuming processes are clear. 

 

Manual processes create five major challenges for legal finance teams: 

1. Client money protection at risk

SRA Accounts Rules require firms to safeguard client money, with processes such as needing to keep accounting records showing all dealings with client money and the firm’s money relating to client or trust matters or structures, arrangements, systems and controls in place that ensure compliance with the SRA’s regulatory arrangements. They therefore expect you to have in place systems and procedures which help achieve the objective of safeguarding money and assets entrusted to you.   SRA Accounts Rules require firms to safeguard client money by maintaining clear accounting records and implementing robust systems and controls to ensure compliance with regulatory requirements. The SRA expects firms to have effective procedures in place to protect client funds, as highlighted in its ongoing Consultation Review, which was launched following high-profile cases of financial mismanagement, such as the Axiom Ince scandal.  Law firms understand that keeping control over client funds is key to maintaining service quality and trust. As highlighted in our early 2025 article, Safeguarding Client Funds: Derisking Client Money Handling in the Legal Sector, Paul Rook, Finance Transformation Lead at Lewis Silkin, explains: “Firms have to work in the best interests of their clients and provide the best service possible. To deliver that service, they may need to hold client funds and have them readily available.”  Similarly, a Senior Finance Manager at a UK Top 50 law firm emphasised the value of internal finance expertise: “Our Finance team has built a reputation for a service which is highly valued by our Partners and, in turn, our clients. If that expertise and control is taken out of the firm’s hands and put through a third party, it would be detrimental to the service we provide to clients, who would ultimately continue to hold the firm accountable for the transactions.”  With law firms handling high volumes of client money transactions daily, having the right controls, processes, and culture is critical. As Rook further noted: “In my previous role, we did hundreds of thousands of client money handling transactions each year. There was never an issue because we had robust controls and processes with a clear segregation of duties. We also had the right culture in recognising the importance of client monies within the organisation.”  The discussion around safeguarding client funds continues, and firms must evaluate the best approach to balancing compliance, security, and operational efficiency.  However, manually processing payments and reconciling client funds increase the reliance on internal procedures, heightening the risk of misallocated funds, SRA breaches, and disciplinary action. Without automation, firms have to depend on human intervention, which introduces avoidable errors and weakens financial controls—leaving them vulnerable to regulatory scrutiny, and even worse, reputational damage.  The rise in cyber threats is also a huge risk for law firms. With 90% of the Top 100 firms citing cyber risks as a major concern (PwC 2024), and 72% of the UK’s top 100 law firms already victims of cyber-attacks, the need for secure, automated financial processes is urgent. The upcoming UK’s Economic Crime and Corporate Transparency Act 2023—Failure to Prevent Fraud offence—taking effect in September 2025, will introduce personal, criminal liability for senior leaders if fraud occurs due to inadequate controls. Organisations can avoid liability by demonstrating they had “reasonable fraud-prevention procedures” in place at the time of the offence. If processes are heavily manual, how easy will this be to prove?   

2. Inefficiency across  cashiering teams

Legal cashiers are crucial members of the finance team for managing client and office accounts, yet firms still rely on manual processes, making hiring a growing challenge. With only 609 active legal cashier CVs in 2024 compared to over 9,000 SRA-registered firms, recruitment is tough to hire cashiers, and workloads for those in firms are high. Day after day handling client payments if these teams are at capacity and under resourced can create delays, particularly during peak periods and can be a pressured and stressful environment to work in.   To overcome this, some firms turn to outsourced cashiering, but this carries risks. At LegalEx, an Operations Director of a Top100 Law Firm confirmed their provider were sending approvals for a different law firms’ client—which raised serious security concerns. Outsourcing can also reduce visibility for the law firm over their client funds, making errors harder to catch and fraud easier to miss, whilst remaining an expensive alternative.  With 61% of Top 100 firms citing working capital performance as a top priority (PwC 2024), firms need internal efficiencies. Yet, many still struggle with generating bank ready files from their PMS, and therefore still require manual adjustments, adding delays and risk to payments.. Reducing t manual processes is critical to maintain profitability and security. 

 

3. Risk of internal fraud

Many firms assume, “Our cashiers or finance team would never collude,” but the reality is that fraud isn’t a question of if—it’s when. As long as manual intervention persists as remains part of your cashiering processes. Every human touchpoint creates an opportunity for misconduct and human error no matter how much you may trust your team, and auditors see ‘people risk’ as a real threat firms need to reduce. 

This was made clear in the widely reported CMS case, where a head cashier misappropriated client funds 124 times, disguising payments to own bank account as ‘client interest.’ The sheer number of incidents raises a critical question—how did these transactions go unnoticed for so long? Beyond regulatory fines, the articles and press published, the reputational damage and loss of client trust would’ve had a huge impact. 

4. Lack of cash visibility

For firms operating across multiple entities, jurisdictions, and currencies, being able to access your cash positions is critical—especially as firms expand their operations to multiple offices and locations. Without it, cashiers are spending time pulling complex reports, reformatting data and manually transforming payment files into bank-ready formats, which varies between banks. This is even more of a challenge as each Practice Mangement System (PMS) can require data in specific formats which don’t always align with the output from the bank. Managing multiple formats from multiple banks only adds to this complexity which increases the risk of the data being incorrect and is time consuming limiting cashiers time to focus on higher-value financial analysis.   Fims need real-time cash visibility of their client and office account balances, but relying on downloaded bank statements can mean data is outdated, or even incorrect. It is only through pms-bank integration and automation firms can get a true, up-to-date view of the cash position.    

5. Lack of bank verification checks

With the risk of fraud increasing for law firms, many transactions are still processed without a Account Name Verification check (also known as Confirmation of Payee (COP), leaving funds potentially vulnerable to paying the wrong person. 

Relying on manual methods such as individual “dummy payments” in banking portals or phoning clients to confirm bank details before making payments can add delays. In many cases, it is the fee-earner, typically a partner of solicitor who spends billable time confirming bank details. These can take minutes or sometimes hours chasing a client if they are not available to confirm details over the phone. For conveyancing firms, where up to four time-sensitive payments can be required on completion day, these delays can create significant bottlenecks in the process.   

If payments are delayed as the bank details are incorrect or have gone to the wrong place, this can negatively impact the experience of the client, potentially disrupt move-in dates, and damage your reputation as a firm, with funds often being difficult or even impossible to recover.  

Additionally, as payment volumes increase, the frequency of erroneous or fraudulent transactions rises, potentially breaching AML and SRA regulations. Automated Account Name Verification (ANV), ) checks, offer a reliable solution to ensure that payments reach the correct recipient, significantly reducing fraud risk and protecting both client trust and firm growth. As organisations have implemented stronger fraud prevention measures, such as verifying payee details, BDO reported that the occurrence of multiple fraud incidents decreased from 49% to 15%. 

 

The hidden cost of doing nothing 

Some law firms may hesitate to make the move to an automated process because of the perceived costs. Not the price of the actual software, but the cost of time and resource of their IT teams to implement it.   While implementing bank connectivity software is far less complex than upgrading a PMS, firms that delay automation may be overlooking the hidden costs of manual processes. Lost productivity, regulatory penalties, the scarcity of cashiers in the market and the mounting opportunity for fraud can make inaction far more expensive in the long run than they realise.  Firms that have embraced automation, however, have seen substantial improvements in finance team productivity. By reducing the time spent on manual payments, like one firm reducing the time taken from 7 minutes to 1 minute, they’ve significantly lowered their operational costs, making each client transaction more cost-effective. This efficiency gives them a competitive edge, allowing them to better compete against other firms showing it is much more than a finance project.  As one top 20 law firm put it, when asked if they would recommend automation to competitors: “Well, not to our direct competitors, because we wouldn’t want to give them that edge!” 

 

Automation is the solution 

By connecting your PMS to your banks, you eliminate manual processes and reduce your risk of fraud, human error and maintaining compliance with SRA Accounts Rules, —saving time and protecting client money.  With 53% of Top 100 firms planning finance transformation within the next two years (PwC 2024), it feels now is the time to use this as your hidden competitive advantage.  To learn more about PMS-to-bank integration and how automation can protect your firm, download our eBook today.