Guide
Glossary
Lock-up
Lock-up is the money a firm has earned but not yet collected: work in progress (WIP) that has not been billed, plus invoices that have not been paid. It is usually shown in days, as WIP days plus debtor days, where each is the balance divided by annual fees and multiplied by 365. A firm billing $3.65 million a year bills about $10,000 a day, so $400,000 of unbilled WIP is 40 WIP days, $500,000 of unpaid invoices is 50 debtor days, and lock-up is 90 days. Lower lock-up means better cashflow and less risk of write-offs. Firms calculate it in slightly different ways, so the method should be written down.
Also called Lock-up days, Working capital lock-up
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Example
In a law firm
For example, a 20-lawyer commercial firm finds its lock-up has drifted past 120 days. Matter-level reporting shows most of it is WIP on a few long-running matters that have never had an interim bill. The partners agree monthly interim billing on larger matters, set up automated debtor reminders at 30, 60 and 90 days, and track lock-up every week.
Guides that explain it in context
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