Lock-up days explained: the formula, a worked example and six fixes

Author: Adam Khalid, Founder and CEO, Intel Made Simple. Sources last checked 28 October 2026.

A profitable firm can still run short of cash. The usual reason is not low fees. It is the time between doing the work and receiving the money, during which the firm pays salaries, rent and tax from its own pocket. Lock-up days put a number on that gap.

This guide gives the formula, works it through on an example with every figure shown, quotes a published example from the Institute of Legal Finance and Management (ILFM), and lists six fixes ordered by which half of the number is larger. It was written with law firms in mind, but the arithmetic is the same for any firm that invoices after doing the work.

What are lock-up days?

The ILFM defines lock-up as the time it takes a firm to convert work undertaken into cash received (opens in a new tab). It is generally calculated by combining two measures:

• WIP days, covering the period between work being carried out and the bill being raised.
• Debtor days, covering the period between the bill being issued and payment being received.

The longer the combined cycle, the ILFM says, the more working capital stays tied up in unfinished billing and unpaid invoices. In effect, the firm is funding its clients' work while continuing to meet salaries, tax liabilities and other operating costs.

How do you calculate lock-up days?

The ILFM article does not give a formula, so what follows is our working convention. Divide each balance by average daily fee income, then add the two results.

• Daily fee income = annual fee income divided by 365.
• WIP days = unbilled WIP divided by daily fee income.
• Debtor days = unpaid billed fees divided by daily fee income.
• Lock-up days = WIP days plus debtor days.

Our arithmetic, with invented figures to show the method: annual fee income £2,000,000, so daily fee income is £5,479 (rounded). Unbilled WIP is £250,000, which is 45.6 days. Unpaid billed fees are £330,000, which is 60.2 days. Lock-up is 105.9 days (45.6 plus 60.2, rounded). Every day removed from that number releases about £5,479 of cash. Cutting 15 days releases about £82,192.

Use the same basis for both balances. If debtors include VAT and WIP does not, the debtor figure will look worse than it is. Pick net or gross, write it down, and keep it for every month you compare.

What does a published example look like at scale?

The ILFM gives its own case. A firm generating £10 million in annual fee income earns approximately £27,000 in revenue each day. At 120 lock-up days, around £3.2 million may be tied up in WIP and debtors. Reducing this to 90 days could release approximately £800,000 in cash (opens in a new tab). Run our formula on the same inputs and you get the same answer: £10,000,000 divided by 365 is £27,397 a day, and 30 days is £821,918. The ILFM rounds to £800,000.

We have not quoted an industry average for lock-up days because we have not read a primary source for one that we would stand behind. The better comparison is your own trailing twelve months. Set the target as a fall against that line and review it monthly.

Why read WIP days and debtor days separately?

A combined number hides where the cash is stuck. In the example above, WIP is 45.6 days and debtors are 60.2 days, so debtors are the larger half. A firm in that position gains more from a chasing routine than from a faster billing run. A firm with the reverse split should start with billing.

The ILFM names the mechanisms behind each half. On the WIP side, late or incomplete time recording can delay billing and distort the value of WIP (opens in a new tab), and work may remain unbilled because billing decisions are postponed, matters are not reviewed regularly or firms wait until completion rather than billing at appropriate milestones. On the debtor side, once invoices are raised, unclear payment terms, inconsistent follow-up and reluctance to challenge valued clients can contribute to growing balances.

Why does the payment term set the floor for debtor days?

Debtor days cannot fall below the term you agreed with the client. GOV.UK explains that if a payment date is agreed it must usually be within 60 days for business transactions (opens in a new tab), and that a longer period must be fair to both businesses. If no date is agreed, the same page says the payment is late 30 days after the customer gets the invoice or after you deliver the goods or provide the service, whichever is later.

Two practical consequences follow. First, a firm that sets 30-day terms and then accepts 75 days in practice is training its clients, and the extra 45 days show up directly in the debtor half of the formula. Second, a firm with no written term has a weaker position than one that wrote 14 or 30 days on the engagement letter, because the lateness clock then rests on a default rather than on an agreement the client signed.

GOV.UK also states that the statutory interest on late business payments is 8% plus the Bank of England base rate (opens in a new tab), unless the contract sets a different rate, and that you send a new invoice if you decide to add interest. Most firms never charge it. Whether you do is a commercial choice about the client relationship, but knowing the right exists changes how a debtor conversation feels.

Which six fixes should you try first?

1. Name an owner and a date for every matter or engagement older than 60 days since the last time entry. Our WIP guide gives the afternoon method.
2. Bill at milestones agreed with the client at the start, not at completion. The ILFM lists waiting for completion as a cause of unbilled work.
3. Put the payment term on every invoice in the same place, in the same words, and send it to the person who approves payment, not the person who instructed you.
4. Run a debtor call list weekly, oldest first, with one named caller. The ILFM points to inconsistent follow-up as a cause of growing balances.
5. State, in your terms of business, that statutory interest and fixed recovery sums apply to late business payments, and use them on repeat late payers. The rules are in our late payment guide.
6. Report both halves to the partners or directors every month on one page, with the same basis each time.

How do you set a lock-up target?

Set the target as a fall against your own trailing twelve months, not against an industry figure. We have not read a primary source for an industry average that we would stand behind, and a borrowed benchmark invites arguments about whose firm is comparable.

Our arithmetic on the invented £2,000,000 firm: daily fee income is £5,479. A 10-day cut, from 105.9 days to 95.9, releases about £54,800. Splitting it by half, five days from WIP and five from debtors, gives two jobs a partner can own. Review it monthly and move the target only when a quarter has passed, so one good month does not become the new baseline.

How do accountancy practices read lock-up next to recovery rates?

ICAEW, the professional body for chartered accountants, makes a related point about recovery rates in its guidance on fees and charge-out rates (opens in a new tab). It says under-recoveries rarely appear in a firm's profit and loss account, so they are largely a hidden cost. Its example is a practice with £400,000 of fees and an 85% recovery rate. Grossed up, that practice did £470,000 of work at full charge-out rates and wrote off £70,000.

If recovery rises to 90%, ICAEW shows two outcomes. The practice can do the same £400,000 of billing with £26,000 of released time, or it can charge £423,000 for the same work. Lock-up measures how late the money arrives. Recovery measures how much never arrives. A practice that reports only one of them sees half the leak.

What should a monthly lock-up review look like?

Our suggested format, which is a working method and not a published standard: one page, thirty minutes, the same attendees each month. The page carries the trailing twelve-month line for WIP days, debtor days and lock-up days, all on the same net or gross basis; the ten largest aged unbilled balances; and the ten largest aged unpaid invoices. Each balance has an owner, a next action and a date.

One rule keeps the meeting honest: no balance leaves the room without a name and a date against it. At the next meeting the first item is last month's list, and any date that passed without action is read out. If the same balance appears three months running, the question changes from what the next step is to why the last two did not work. The aim is a short routine that nobody can skip, because the ILFM's point is that these issues are rarely the finance team's alone and that fee earners, partners, management and finance need shared expectations.

Where does lock-up work go wrong?

Three errors recur in lock-up work. The first is averaging: a firm with ten clients on 20-day terms and one on 150 days has an average that describes nobody, so list the ten largest balances by age as well as the ratio. The second is a one-off push at year end that flatters the figure on the balance sheet date and is gone by February. The third is treating the number as a finance team target. The ILFM is direct about this: lock-up should be treated as a firm-wide operational and strategic priority, supported by clear processes, meaningful management information and appropriate accountability.

What should you do next?

Calculate the two halves for the last twelve months, month by month, on one basis. That takes a spreadsheet and the two balances from your ledger. If the result points to a leak you cannot explain, our free Leak Scan checks where cash drops out between work and payment. For a worked review of an accountancy practice, see how we approach accountancy firms, and for the fixed-price options see the pricing page. If you want a second pair of eyes on the numbers before you change anything, the AI Readiness Audit starts at £1,500.

Lock-up questions firms ask

What are lock-up days?

The ILFM defines lock-up as the time it takes a firm to convert work undertaken into cash received. It is generally calculated by combining WIP days, from work done to bill raised, with debtor days, from bill issued to payment received.

How do you calculate lock-up days?

On our working convention, divide unbilled WIP and unpaid billed fees by average daily fee income, then add the two results. Use the same net or gross basis for both balances so the ratio is not distorted.

What is a good number of lock-up days?

We do not quote an industry average because we have not read a primary source for one that we would stand behind. The useful comparison is your own trailing twelve months, with a target set as a fall against that line.

Which half of lock-up should a firm fix first?

The larger half. In our invented example debtors at 60.2 days exceed WIP at 45.6 days, so a chasing routine would release more cash than a faster billing run. A firm with the reverse split should start with billing.

How much cash does one lock-up day release?

One day of lock-up is worth one day of fee income. On £10 million of annual fees that is about £27,397, which is why the ILFM's 30-day reduction is worth about £800,000.