Law firm operations · United Kingdom
Payments on account: what US firms do differently.
A payment on account is money a client places with a firm before a bill is raised. It sits in the client account and is drawn down against interim bills. UK and US firms both take them, under the same underlying principle. What differs is the trigger for the top-up.
What a payment on account actually is
Money a client pays a firm in advance of a bill, held against future costs. Under the SRA Accounts Rules it is client money — Rule 2.1(d) covers money held for your fees and unpaid disbursements received before you deliver a bill. It stays in the client account until you bill for the work it relates to. The billed portion then becomes office money and moves.
The difference is the trigger, not the money
US firms commonly operate an evergreen retainer. The client places a sum in trust, the firm bills against it, and a defined minimum balance triggers the replenishment request. When the balance drops below the threshold, the request goes out.
The common UK arrangement bills at intervals and asks the client to top up when the firm notices the balance running low. Same client money, same protection, same regulator-set boundary on when the firm can draw it. One arrangement has a threshold. The other has a moment of noticing.
| Evergreen retainer (US) | Payment on account (UK) | |
|---|---|---|
| Where the money sits | Client trust account | Client account |
| When it can be drawn | Against a bill | Against a bill |
| What prompts the top-up | A stated minimum balance | Someone noticing |
| Who decides it is time | The threshold | A fee earner or partner |
Why the trigger shows up in lock-up
Lock-up is the number of days between doing the work and banking the fee.
Those two numbers come from different samples and different methods, so treat the gap as directional rather than arithmetic — do not put 41 days in a business case. The direction holds across sources, and the replenishment trigger is one plausible contributor. If you hold funds for the next stage of work, part of that cycle is already cash sitting in the client account. If you are waiting on a top-up that nobody has requested, it is not.
Partners review utilisation. They review realisation. The number of days cash spends inside the billing cycle tends to surface at year end, by which point the year has gone.
What a replenishment policy looks like
This is Decision Authority applied to the cash cycle: a threshold that fires without a partner deciding it should. Three components.
A minimum balance stated in the client care letter, set as a proportion of the expected next-stage costs rather than a flat sum. You agree it at engagement, when the client is most willing.
A weekly report listing every matter that has fallen below its threshold, reviewed by name alongside aged WIP and aged debt.
One named person accountable for making the top-up request, with authority to make it without escalating to the matter partner. Route the request through a fee earner who is mid-trial and the threshold stops working.
One firm moved collections from 79% to a 92% average by putting governance around the same class of decision, at the collection point rather than the replenishment point. Same mechanism: a defined trigger in place of a judgement call.
What the difference is worth
Run your own numbers. On £1.5m of annual fee income at 134 days lock-up, roughly £550,000 of earned cash sits inside the cycle at any moment. Every ten days you remove releases about £41,000, permanently, without new work.
Run it on your figures with the lock-up calculator →
What this is not
This is not an argument that US firms run better practices. It is one mechanism, in one part of the cash cycle, where the US default happens to be structural and the UK default happens to be discretionary.
It is also not a suggestion to hold more client money, or to hold it differently. The SRA rules are not the constraint. The gap is that in most firms, no one owns the moment the request goes out.
Questions firms ask
Is a payment on account client money?
Yes. Under SRA Accounts Rules 2.1(d), money held for your fees and unpaid disbursements before you deliver a bill is client money. It moves to the office account once you have billed for the work it relates to.
What is an evergreen retainer?
A US arrangement in which the client maintains a minimum balance in trust. When billing draws the balance below that minimum, the firm's replenishment request is triggered by the threshold rather than by someone remembering.
Can UK firms operate a minimum-balance policy?
Firms already take and replenish money on account. Setting a stated threshold changes when the request goes out, not how client money is held or drawn. Confirm your own approach against the SRA Accounts Rules and your client care documentation.
What is a good lock-up figure for a UK law firm?
UK firms report a median of 134 days excluding unbilled disbursements. Well-governed firms run below it. The benchmarks page sets it alongside utilisation, realisation and collection.
Related reading
Structure the cash cycle so it runs without you
Operational structure for UK law firms — collections and lock-up under control, capacity visible, partners freed to do the work only they can do.