The Lock-Up Dilemma

Lock-up is a pervasive issue in many law firms, that ultimately hinders financial stability.

The delay between working on matters on behalf of clients and when cash is collected can cause severe cash flow issues for firms. “Lawyers excel at providing legal expertise, but we’ve seen how the administrative burden of billing can impede their productivity and the firm’s cash flow.” Comments Joe Barrs, Pace’s Director of Consulting. While a seemingly complex issue, Barrs advocates for experimentation with process design as a potential solution.  

One effective strategy Pace is exploring is to commercially motivate lawyers to reduce the time between ‘service-to-cash’. “By aligning lawyers’ incentives with timely billing, we believe that firms can begin to encourage a culture where quick and accurate billing becomes a norm,” Barrs suggests. 

Another effective measure is to transfer the billing process from lawyers to a dedicated admin or accounts team. “Lawyers should focus on their core competencies—practising law and serving clients. Delegating billing to specialised staff should ensure invoices are sent promptly and correctly,” Barrs notes. Billing clients is a significant part of managing the client relationship, so steps can be taken to avoid risk by detaching this part of the process from a lawyer’s duties. 

Pre-agreeing billing milestones with clients is crucial. Barrs explains, “Establishing clear billing milestones upfront, the categorisation of services and the language used to describe billables ensures transparency and predictability for both parties. This practice potentially not only improves client satisfaction, but also facilitates smoother cash flow management.” 

Incorporating these agreements into the Know Your Client (KYC) process could further streamline operations. “Including billing process agreements in the KYC process sets clear expectations from the outset, fostering trust and efficiency,” Barrs advises. 

Moreover, Barrs emphasises the importance of tackling lock-up by pre-agreeing the language and specifications of invoices between lawyers and clients. “Miscommunications about billing details can lead to disputes and delays. Clear, upfront agreements on invoice format and language should prevent these issues.” 

In summary, addressing lock-up through better process design and strategic delegation has the potential to significantly enhance law firms’ cash flow and operational efficiency. By commercially motivating lawyers, delegating billing tasks appropriately, and establishing clear billing protocols, firms can turn lock-up from a challenge into an opportunity for growth and stability. “Empowering lawyers with these tools could not only improve their workflow but also the firm’s overall financial health,” Barrs concludes. 

Article contributors: Wings Turkington, Head of Knowledge Management and Joe Barrs, Director of Consulting.