Legal News
The key to reducing lock-up days
20/02/2012
The number of law firms struggling with lock-up days remains high, new research has found.
A survey of more than 60 firms, carried out by Crowe Clark Whitehall, reveals that a third of these had lock-up in excess of 150 days, while the average lock-up period was 130 days.
Lock-up is the amount of time it takes a firm to convert work done for a client into cash. However, excessive lock-up can have a significant impact on a firm’s cash flow. They will have staff and landlords to pay, while partners may also want to take their drawings.
Firms wanting to fund lock-up have a few options, such as borrowing from their bank, partners contributing more capital or restricting partners’ drawings or distributions.
The best solution is to take action before lock-up is allowed to build, such as agreeing the amount payable with clients at the earliest opportunity, discussing interim billing options with them and sending out invoices promptly once work is completed.
Partners should also do their bit to ensure consistency in credit control, while partners and fee earners should also be reminded of the importance of tackling lock-up and helping to collect bills.
