Picture the scene: you have just gotten off the phone with a tricky client and ping! The client account reconciliation statement arrives in your inbox. The accounts team has done the work, the figures all agree and there is a space for your signature. You have another client meeting in ten minutes. Everything looks much the same as last month.
What, exactly, are you checking?
For a COFA who does not have an accounting background, this can be an uncomfortable question. You know that reconciliations are important. And you trust the person who prepares them. But knowing whether a set of figures warrants further investigation is a skill in itself.
A reconciliation can balance while the underlying records contain entries that need urgent attention. Money may have been allocated to the wrong client. A debit balance may have been obscured within a net total. Funds may have remained on a completed matter long after they should have been returned.
None of those problems is necessarily clear if you just look at the totals line at the bottom of the page.
What does signing off involve?
Rule 8.3 of the SRA Accounts Rules requires a reconciliation at least every five weeks, comparing the bank or building society statement balance with the cashbook balance and client ledger total. Discrepancies should be investigated and resolved promptly. The document must be signed off by the COFA or a manager of the firm.
The SRA’s accompanying guidance goes further into what that review should involve: checking the reconciliation, monitoring corrective action and making enquiries about unusual or unresolved items. The COFA’s signature alone tells us very little about whether any of this happened.
That does not mean repeating the cashier’s work. Nor should every routine query turn into an investigation. A good working relationship with the accounts team is important, and sensible questions should be part of that relationship rather than a suggestion that someone is not trusted.
The difficulty comes when trust becomes the entire review process.
Five questions provide a useful starting point.
1. What has actually been reconciled?
It sounds basic, but ask someone to take you through where each figure comes from.
The bank statement records what the bank holds. The cashbook records the firm’s client-account transactions. The client ledger balances show how the money is attributed to individual clients and matters. The reconciliation brings those records together, allowing for properly explained timing differences.
You should be able to follow that exercise back to the underlying documents. A summary generated by the accounts software is useful, but it should not be the only thing available to you.
Check the dates, too. Are the records being compared at the same point in time? Has all client money been covered, including that held in separate designated accounts? If there has been a change of bank, an acquisition or a new office, has the reconciliation process kept up?
These are worth asking even when the firm has used the same system for years. Familiarity with the layout of a report is not quite the same as understanding its contents.
2. What sits behind the reconciling items?
There are perfectly ordinary reasons why a bank statement and cashbook may differ. A cheque might have been recorded but not yet presented. A receipt might reach the bank after the reconciliation date.
The question is whether the explanation fits the transaction.
If it’s a “timing difference”, which payment or receipt is involved? When did it arise? Has it since cleared? If it is still outstanding, why?
An item appearing for the first time may require little more than a straightforward explanation. The same item appearing month after month deserves closer attention.
A useful habit is to ask for the oldest outstanding items first. That often tells you more than working down the schedule in order of value. A modest amount that nobody has been able to explain for six months may reveal a process that needs fixing.
3. Are there balances that need a separate explanation?
The total is only part of the picture. Look at the individual balances behind it.
Client-side debit balances deserve particular attention. The SRA’s guidance says they should be separately listed, investigated and corrected promptly, rather than deducted from the total credit balances. Otherwise, a reassuring net figure may disguise a problem on an individual matter.
For example, suppose the records show £100,000 owed to clients with credit balances and a £2,000 debit on another matter. A net total of £98,000 agreeing with the bank balance would not address the £2,000 problem.
Residual balances and unallocated receipts raise different questions. Why is the money still here? Who owns it? Who is responsible for dealing with it? What has been done so far?
Money on an inactive matter is not automatically being held improperly; there may be a continuing reason for retaining it. But that reason should be identifiable. Rule 2.5 requires client money to be returned promptly once there is no proper reason to hold it.
Suspense entries also need attention. Moving an unexplained amount into a suspense ledger may change where it appears on the reports. It does not establish whose money it is or resolve the underlying issue.
4. What has changed since last time?
Reviewing each reconciliation in isolation makes it harder to spot a recurring problem.
Perhaps the outstanding items are increasing. Perhaps the same type of posting error keeps returning. Perhaps the suspense balance is growing, although each individual receipt looks unremarkable.
The practical question is whether the firm is resolving problems or carrying them forward.
5. What happened after the issue was identified?
A query noted on a reconciliation ideally needs a plan, an owner and a timescale. Someone also needs to check that the promised action happened.
Consider this hypothetical example. A reconciliation includes a £4,800 item described as “transfer timing”. It appeared on the previous reconciliation as well. The reviewer is told that accounts are looking into it.
That may be the start of an appropriate response, but it is not the end. Which accounts were involved? What should have happened? What actually happened? Has the underlying transaction been traced? Is there missing money, an accounting error or a genuine outstanding transfer?
The answer determines the action. Where money is missing, this cannot wait for the next monthly review. The SRA’s warning notice makes clear the urgency of replacing missing client money. The reporting position must also be considered: the COFA’s obligation includes taking reasonable steps to ensure a prompt report of matters reasonably believed capable of amounting to a serious Accounts Rules breach.
For less serious issues, a record of the error, correction and underlying cause helps the firm identify repetition. Fixing the entry without asking why it arose may leave the same weakness in place.
Enough understanding to ask the next question
Many COFAs inherit the role without any background in accounts, or anyone taking them through a reconciliation in detail. The last time they looked at double entry bookkeeping may have been on the LPC. They receive reconciliation reports, learn the firm’s routines and become accustomed to signing them. It is entirely possible to be diligent and still have gaps in that practical understanding.
Those gaps are worth addressing openly. Asking the accounts team to explain a report is a sensible starting point. So is agreeing what supporting information should accompany it and how unresolved queries will be followed up.
A short record of the questions asked, explanations received and action taken is more useful than a signature that leaves everyone guessing about the extent of the review.
The aim is not to make the COFA suspicious of every item on the reconciliation statement. It is to give them enough understanding to recognise when an explanation makes sense, and when they need to ask another question.
Sean Hankin and Liz Bond, both former SRA specialists, will work through reconciliations and other practical client-account problems at JBL Compliance’s COFA Masterclass on Wednesday 7 October 2026, from 10:00 to 16:00 at Castle Bromwich Hall Hotel, Birmingham. The in-person course also covers banking facilities, residual balances, suspense ledgers and mixed receipts.
Places cost £495 plus VAT per delegate. Complete the booking form, or contact sam@jblcompliance.com with any questions.
