Lockup is a term used to describe two components of Working Capital. It is the combination of your Work In Progress (WIP) and Debtors.
It can also be expressed in days - the amount of days taken to convert your WIP and your Debtors (Receivables) into Cash.
It is calculated by combining the two measurements:
Debtors (Receivables) - money owed to you
To improve Debtors you could:
- Have clear terms of trade.
- Make Payments easier.
- Issue statements on overdue accounts.
- Ask for part payment upfront / deposit before commencing the engagement / transaction.
- Issue letters / followed by phone call advising the client / customer of the overdue account.
Work In Progress (WIP) - Work that has been done but not invoiced
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 & Company - Chartered Accountants, located minutes from the Melbourne CBD
www.mcnamaraandco.au/contact-us
Phone +61 3 9428 1062
Email admin@mcnamaraandco.au
Please refer to disclaimer at the bottom of the page.
