Short answer: Lockup is the number of days between doing the work and collecting the cash: days of unbilled work in progress (WIP) plus days of receivables. High lockup means the firm is financing its clients. Shortening it frees cash, reduces write-offs and lowers the need to borrow, often more than any cost-cutting exercise.
Measuring lockup
- WIP days: unbilled time and expenses ÷ average daily fees.
- Debtor days: receivables ÷ average daily billings.
- Lockup: WIP days plus debtor days.
Where lockup builds up
- Time entered late, so bills go out late
- Waiting for "the end of the matter" to bill
- Partners reluctant to bill or chase clients
- Disputed invoices because scope was unclear
- No regular review of old WIP and receivables
How to reduce it
- Require timely time entry, ideally daily.
- Bill monthly or at milestones, not at the end.
- Review aged WIP and receivables in a monthly meeting.
- Agree payment terms and retainers upfront.
- Offer electronic payment and automate reminders.
- Track lockup by partner and practice.
How Capstone CFO helps
- Build WIP and receivables aging reports by partner, client and matter
- Run a monthly lockup review with clear owners and actions
- Improve billing cycles, terms and collections processes
- Forecast cash using billing and collection patterns
- Reduce write-offs by catching problems earlier
Frequently asked questions
What is a good lockup figure?
It varies by practice area and client type. Track your trend and compare across partners and practices.
Should we use retainers?
For new or higher-risk clients, retainers reduce collection risk and lockup.
How does lockup affect cash flow?
Every day of lockup is a day the firm funds client work out of its own cash.
Want to free up cash in your firm? See how we solve cash flow problems or book a call with our CFO team.