Lock up is the number of days between doing chargeable work and banking the fee for it. It has two parts: WIP days, for time recorded but not yet billed, and debtor days, for fees billed but not yet paid. A practice that measures both every month, bills as work is done and collects to written terms needs less overdraft and partner capital to fund the same level of work.

What does lock up measure and why should a practice track it?

Profit and cash are different things. A practice can report a healthy profit while its cash is tied up in unbilled time and unpaid invoices, and it is cash that pays salaries, rent and the VAT quarter. ICAEW’s guidance on financial stability measures in professional firms describes lock up as the time between starting work and converting it into cash, broken down into WIP days and debtor days. It notes that firms often fail because they run out of cash rather than because they lack profit, that high lock up increases reliance on borrowing or owner capital, and that a sudden rise in lock up can be one of the earliest signs of operational strain.

The same guidance points out that ageing WIP and debtors indicate poor job management or credit control, which exposes a firm to irrecoverable WIP, bad debts and negligence risk. That last point is easy to miss: a job that has sat half finished for months is often a job where something has gone wrong for the client too.

How are WIP days and debtor days calculated?

There is no statutory formula, so the important thing is to pick a method and apply it consistently every month. A common approach uses a rolling twelve months so that seasonal peaks do not distort the result.

Measure Common calculation Points to watch
WIP days Unbilled WIP at the month end divided by fees billed in the last twelve months, multiplied by 365 Value WIP at the amount you realistically expect to bill, not full charge out value
Debtor days Fee debtors at the month end divided by fees billed in the last twelve months, multiplied by 365 Debtors include VAT, so compare them with VAT inclusive billing or strip VAT out of both
Lock up days WIP days plus debtor days Report by partner, team and service line as well as for the whole firm

The figure that gives most information is usually the trend and the split. A firm whose lock up is stable but whose WIP days are rising while debtor days fall is billing later and collecting faster, which points to a production problem rather than a credit control problem.

Which other KPIs belong alongside lock up?

Lock up shows how quickly work turns into cash. It says nothing about whether the work was worth doing. Most practices pair it with:

  • Recovery rate: fees billed as a percentage of time recorded at standard rates.
  • Write offs: WIP or debts written off, by client and by job type.
  • Chargeable hours: recorded client time against available hours for each fee earner.
  • Turnaround: days from receipt of complete records to filing or delivery.
  • Client profitability: fee against the full cost of serving the client, which feeds into a review of the client base.

ICAEW’s practice resource on fees and charge out rates explains why recovery deserves attention: under recoveries do not appear in most firms’ profit and loss accounts, so they are largely a hidden cost. Its example is a practice with £400,000 of fees at an 85% recovery rate, which has actually done £470,000 of work at full charge out rates. The same resource notes that, generally, the shorter the period from starting an assignment to completing it, the better the recovery, which links recovery directly to WIP days.

What does the calculation look like for a small firm?

Illustration only. A practice billed £600,000 in the last twelve months, excluding VAT. At 30 June it has unbilled WIP that it expects to bill at £90,000 and fee debtors of £84,000 excluding VAT.

  • WIP days: £90,000 divided by £600,000, multiplied by 365, is about 55 days.
  • Debtor days: £84,000 divided by £600,000, multiplied by 365, is about 51 days.
  • Lock up: about 106 days.

If the firm moved most compliance clients to monthly fixed fees billed in advance and cut WIP days to 30, it would release roughly £41,000 of cash (25 days multiplied by £600,000 divided by 365) without earning a penny more in fees.

How can a practice reduce WIP days?

WIP builds up when work is started before it can be finished, when jobs stall at review, and when billing waits for a client meeting. Practical steps include:

  • Bill in advance or in instalments. Monthly fixed fees collected by direct debit remove most compliance WIP. Under regulation 5 of ICAEW’s Clients’ Money Regulations, fees paid in advance for professional work agreed to be performed and clearly identifiable as such are not clients’ money. The pricing choices are covered in fixed fees vs hourly rates.
  • Do not start until the records are complete. ICAEW’s fees resource advises against starting an assignment without all the information needed to complete it, because every time a file is picked up and put down again it costs time. A records checklist and chasing routine, as described in getting records from clients on time, helps here.
  • Give staff a budget. The same resource suggests telling staff how much of the fee is available for their part of the job, leaving time for review and the client meeting.
  • Bill on completion of each stage rather than when the whole engagement closes, and agree interim billing for long advisory work in the engagement letter.
  • Review aged WIP monthly. Any WIP older than an agreed limit should be billed, written down or explained by the responsible partner.

How can a practice reduce debtor days?

Collection starts with the terms. The engagement letter should state when fees are payable and what happens if they are not. For business clients, the Late Payment of Commercial Debts (Interest) Act 1998 gives a statutory right to interest and recovery costs. GOV.UK explains that statutory interest is 8% plus the Bank of England base rate for business to business transactions, that it cannot be claimed if the contract sets a different rate, and that where no payment date is agreed a payment is late 30 days after the customer receives the invoice or the service is provided, if later. A fixed sum can also be charged once per payment:

Amount of debt Fixed sum
Up to £999.99 £40
£1,000 to £9,999.99 £70
£10,000 or more £100

These rights do not apply to individual consumer clients, such as most Self Assessment only clients, so terms for them need to be set contractually. Beyond terms, the habits that make the most difference are invoicing on the day work is delivered, sending statements promptly, and a fixed chasing timetable owned by a named person. Where a client still does not pay, recovering unpaid fees covers the pre action steps and court route. Taking fees out of a tax refund without the client’s agreement is not a collection method; the client money rules restrict when that can be done.

How should the numbers be reported and used?

A one page monthly report is enough for most firms: lock up, WIP days and debtor days against target, an age analysis of WIP and debtors by partner, recovery and write offs for the month, and the ten largest aged items with an owner and an action. ICAEW’s commentary on cash management in professional firms recommends billing at least monthly and keeping lock up as a standing key performance indicator. Targets work best when partners see their own figures alongside the firm’s.

Seasonality needs care. A practice with a heavy January Self Assessment peak will see WIP climb in the autumn and debtors rise in February. Comparing each month with the same month last year is more informative than comparing it with the previous month.

What mistakes distort the figures?

  • Valuing WIP at full charge out rates when history shows it will be billed at a lower recovery, which overstates WIP and hides write offs until year end.
  • Mixing VAT inclusive debtors with VAT exclusive fees, which inflates debtor days by the VAT rate.
  • Leaving unbilled disbursements and third party costs out of WIP.
  • Reporting only a firm wide average, so one partner’s aged book is masked by everyone else.
  • Treating a fall in WIP caused by write offs as an improvement.
  • Setting debtor targets without changing the engagement letter terms that drive them.

Solar Protect runs fee protection schemes for accountancy and bookkeeping practices. See how our accountant schemes work or read fee protection schemes for accountants.

Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.