Profit goes up when you issue an invoice. Cash goes up when the money lands in your bank. That gap is where many businesses get caught out.
What is lockup?
Lockup is cash tied up in:
- Work in progress – you have done the work but not billed yet
- Accounts receivable – you have billed but have not been paid
Reduce lockup and you will improve cashflow without selling more or cutting costs.
Two levers to free up cash
1) Billing: invoice earlier, invoice smarter
- Bill promptly. The faster you invoice after delivery, the faster you are paid.
- Use progress billing. If work spans weeks or months, raise milestone invoices instead of waiting for completion.
- Automate. Use job or accounting software to trigger invoices as tasks are completed.
- Be clear up front. Scope, price, and timing should be agreed to avoid disputes that delay payment.
2) Collections: make it easy (and expected) to pay
- Set expectations first. Get signed Terms of Trade before you start, including when payment is due (for example, 7 or 14 days). Shorter terms mean less lockup.
- Offer multiple payment options. Include Pay Now links on invoices and statements. Accept direct debit, credit card, EFTPOS, and where appropriate, debtor finance.
- Put details on every invoice. Show due date, bank details, and contact information clearly.
- Reward speed. Consider a small prompt-payment discount if it suits your margins.
- Follow a calm, consistent cadence. Friendly reminder before due date → day-after follow-up → escalating but professional reminders. Automate where possible.
There are plenty more strategies we can tailor to your business and industry. Book a Cashflow & Profit Improvement meeting with our team and we will map out practical steps to reduce lockup and put more cash in your bank.
