What is Debtors and Work in Progress Lock Up and how do you reduce it?

25 July 2016

Admin User

Debtors and Work in Progress Lock Up otherwise known as Lock Up is the amount of days taken to convert your WIP and your Debtors / Receivables into Cash.

It is calculated by combining the two measurements:
 

Debtors / Receviables (money owed to you)

http://www.mcnamaraandcompany.com.au/blog/the-importance-of-having-good-control-of-your-debtors

To improve Debtors / Receivables you could:

  •      Have clear terms of trade.
  •      Make Payments easier.
  •      Issue statements property on overdue accounts.
  •      Issue letters / followed by phone call advising the client / customer of the overdue account.

 

Work In Progress (WIP)

http://www.mcnamaraandcompany.com.au/blog/what-is-the-financial-measurement-work-in-progress-wip-days-or-stock-days-and-how-is-it-calculated

To improve your WIP you could:

  •      Communicate to the client / customer what is required to complete the task / engagement.
  •      Issue interim accounts.
  •      Issue invoices promptly at the end of the engagement.

 

If you would like to discuss further please contact us:
McNamara and Co - Chartered Accountants, located minutes from the Melbourne CBD
www.mcnamaraandcompany.com.au/contact-us
Phone +61 3 9428 1062
Email admin@mcnamaraandco.com

Please refer to disclaimer at the bottom of the page.

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