Calculating interest on client account funds

Learn how to use our Client Account Interest Calculator to automate and allocate interest earned on client account balances across all matters.

Configuring the Interest Rate Sets

Before you begin, you should set up your firm's client account interest rates. To do this:

1. Open the Smokeball Web App.

2. Select the Settings (gear) icon on the bottom-left corner, then select Firm Settings.

   

3. Select Accounts from the left menu, then select the Client Account Interest tab.

   

4. Click + ADD.
5. Tick either the Flat Rate or Tiered Rate option.

   • Flat Rate - this is a single interest rate percentage that applies to all client balances, regardless of amount or deposit date.

     

   • Tiered Rate - this option allows you to define multiple amount-based tiers. Each tier must have a corresponding interest rate and applicable balance, with balance being the individual balance held on each matter, NOT the overall client account balance. Example tiers could be:

     • Balance greater than or equal to £0 rate is 0%
     • Balance greater than £5,000 rate is 1%
     • Balance greater than  £10,000 rate is 1.5%

     

6. Specify the Minimum Threshold. This represents the lowest amount of calculated interest that your firm considers "fair" that would then be receipted against a matter; it's an amount you decide as a firm.
   • For example, if the interest calculation shows that several matters have interest owing of less than £100, and your firm deems anything over £100 to be fair and reasonable, then the minimum threshold should be set as £100 as their minimum threshold so interest owing under £100 would be excluded from the automatic receipting of the amount onto the matter.
   • You can still add interest amounts below the threshold, by manually adding them when running the receipt.
7. Select Save. 

Using the calculator

Once you have configured the rate sets, you can access the calculator from the Interest Calculator tab in the Accounts section.

Choose the client account (if you have multiple) and select Calculator. The calculator will appear on the right-hand panel.

From this screen you can:

1. Enter in the run to date
2. See the minimum threshold set in the firm settings
3. Run the calculation
4. Save the calculation as a draft
5. Process the interest receipt 

Note: You can only run an interest calculation up to and including the day prior, as the client account balance could change throughout the current day. The date picker blocks the current day and future dates.

Once you select Run, each matter balance will be updated with the interest due. 

• The system calculates interest based on the balance held on the matter and the duration the balance has been held.
• The returned results will list all matters that have interest owing (if the interest is £0 they will not display).
• The matters where the interest amount is over your minimum threshold will automatically be ticked.
• The matters with interest due below the below your minimum threshold will be displayed but will not be automatically ticked. You can tick them manually to include them in the receipt.
• Toggle off Show matters with interest below threshold to hide matters with small interest balances. They will be hidden from view only. 

If your firm has an approval process before processing interest receipts, utilise the Save Draft button above Process Receipt, or Print or Export CSV on the top-left corner of the data to work on it further. The printout contains signature blocks for the purpose of approvals.

You can exit the page at any time and your calculations will be saved, however if you change the Interest Rate settings while a draft calculation is still open, you will be given the option to re-run the calculator with the new settings or proceed with the rate prior to the change.

Processing the interest receipt

When you are ready to process the interest and receipt the interest amounts to the selected matters, click Process Receipt. A final screen will appear which displays the total matter and amount to be processed.

The reason that will display on the receipt is automatically populated and contains the full detail as required by the SRA. 

Select Process Receipt to finalise. 

Note that all interest receipts that are posted by the calculator will, by default, be prefixed with A-INT on the receipt number. This cannot be changed. However you can change the prefix of receipted interest outside of the calculator (outlined below).

Reversing an interest receipt

In order to reverse an interest receipt, it must be:

1. The most recent bulk interest posting, and;
2. There are no subsequent saved interest receipt calculations.

Reversals apply to all related interest deposits across all matters. They include the total receipt amount and number of affected matters. A reason is also required when reversing. 

Once reversed, the interest is treated as not posted, allowing the same period to be recalculated if needed, while ensuring interest numbering continues sequentially and is not reused.

Manually receipting interest outside of the calculator

Before you begin, ensure you have set up your custom interest numbering for manually receipted interest receipts:

1. Select the Settings (gear) icon on the bottom-left corner, then select Firm Settings.

   

2. Select Accounts from the left menu, then select the Client Account Transaction Numbering tab.

3. Scroll down to Client Account Interest Receipts Transaction Numbering and specify your numbering format in the Starting Number, Prefix and Number of Leading Zeros fields.

   

4. Select Save.

To manually add interest to a matter, receipt interest in the same way as before. However now you are required to enter a date when the Interest Calculator should next pick up this matter and include it in future bulk interest calculations.

This ensures:

• The matter is not double-counted for interest
• Future interest calculations resume from the correct date
• Bulk calculations remain accurate and consistent

Printing an Interest Only report

To print a report for your client that only contains interest amounts:

1. Navigate to Accounts on the left panel and select the relevant client account.

2. Select Print, then click Print Interest Only from the drop-down menu.

   

Generating an Interest Report for auditors

To remain compliant with the SRA Accounts Rules, the system generates an Audit Report whenever the Interest Calculator is used.

The Audit Report provides a complete record of all interest calculations for the selected period, including:

• Matters where interest was receipted and posted

• Matters where interest was calculated but not receipted, either because:

  • The amount fell below the firm’s minimum “fair and reasonable” threshold, or

  • The user manually chose to exclude the matter from the receipt