From work completed to cash collected: closing the gap in law firm cash flow
Alanah Murphy, head of sales and marketing at Avail, highlights how law firms can improve financial health by shortening lockup times with AI-enabled workflows, as firm profit margins face increasing pressure
For many law firms, profitability is not the problem – cash flow is. A firm can have a strong pipeline of work, healthy fee income and a full team of busy lawyers and still struggle to convert that work into cash in the bank quickly and predictably. In an environment of rising costs and increased client scrutiny over fees, lockup has become one of the most important financial metrics in legal practice management.
Lockup represents money earned but not yet collected and for many firms this can run into millions of pounds. Every extra day that work remains unbilled or unpaid has a direct impact on working capital, partner drawings and a firm’s ability to invest in growth.
Lockup isn’t a finance issue, it’s an operational issue that runs through every stage of a matter lifecycle: opening files, producing documents, billing clients and chasing payment. That is why firms are increasingly turning to technology, particularly AI, to remove workflow frictions and improve cash flow performance.
Why lockup persists (even in high-performing firms)
There are several common causes of excessive lockup in firms.
Billing is often deprioritised leading to a delay in bills being raised. Lawyers are busy and many firms still rely on manual processes for this.
Fee earners frequently spend significant time on administrative, document heavy work that slows matter progression. In real estate, for example, lawyers might be waiting on searches or reviewing lengthy titles or leases to produce reports. When matters slow down, billing follows.
Firms can also be hesitant to have difficult conversations with clients about payment expectations, particularly in competitive markets where there is pressure to maintain strong relationships.
The result is a familiar picture: high work in progress (WIP), rising debtor days and finance teams spending increasing amounts of time chasing invoices that could have been avoided in the first place.
Where AI can make a difference
AI is often associated with productivity gains, but its impact on cash flow may be even more immediate.
At its core AI can help firms reduce the time between instruction, completion, billing and payment. It does this by removing friction from legal workflows and giving lawyers more time to apply their expertise and focus on chargeable work.
In real estate transactions, AI tools can review and report on titles, leases and other documents in a fraction of the time and with high levels of accuracy, extracting key terms far more efficiently than manual review alone. This means matters progress faster, bottlenecks are reduced and bills can be raised earlier. There is also clear scope for AI to be used to automate billing processes, reducing the time between matters completing and bills being raised. While these interventions seem incremental they can have a material effect on lockup.
The real barrier: behaviour, not technology
Technology alone will not solve lockup if underlying behaviours remain unchanged. Too often, lockup is seen as the responsibility of the finance team when in reality every partner and fee earner has a role to play.
Firms that perform well on cash flow tend to have clear billing disciplines, regular WIP reviews and strong accountability around debtor management. They also ensure that lawyers understand the financial impact of delay.
AI can assist by reinforcing these behaviours. It can be used to make financial data more visible. It can be used to show partners which matters are slow-moving, which teams have the highest lockup and where billing is falling behind target. Rather than relying on month-end reports, firms can have a near real-time, matter-level view of their working capital position.
The key is to position AI not as a replacement for lawyers, but as a tool that helps them run matters more efficiently and get paid more quickly.
A strategic opportunity
In a challenging market, improving lockup is one of the fastest ways for firms to strengthen cash flow without increasing headcount, changing pricing or winning more work.
A reduction of even a few days in WIP or debtor days can release substantial cash back into the business almost immediately. That can support investment in talent, technology and growth, while reducing pressure on overdrafts or partner capital.
For firms considering where to focus their AI investment, cash flow should be high on the agenda. The most immediate return on AI may not simply be in saving time, but in in accelerating the journey from completed work to collected cash. In an industry where margins are increasingly under pressure, that is where some of the most meaningful gains can be made.
