Businesses don’t go broke because they’re unprofitable. They go broke because they run out of cash. A trade business can be profitable on paper and still miss wages on Friday, because profit is an opinion about the year and cash is a fact about this week. The difference between the two is timing, and timing is something you can control.
Where the cash actually goes
The classic squeeze looks like this: you buy materials up front, pay your crew weekly, finish the job, invoice at the end, and then wait 30, 45, sometimes 60 days for the money. The bigger the job, the longer you’re the bank. Stack two or three of those and a good month of work becomes a terrifying month of cash. Add a quiet fortnight, a tax bill you didn’t put aside for, and one slow payer, and suddenly a profitable business is borrowing to survive.
Five habits that fix most cash flow problems
- Deposits, always. A deposit before you order materials means the client funds the job, not you. It also filters out the clients who were never going to pay well.
- Stage payments on anything big. Break the job into milestones and invoice at each one. You should never be more than one stage deep in unpaid work.
- Invoice the day the work is done. Not Sunday night. Not end of month. Every day between finishing and invoicing is a free loan to your client.
- Chase on a schedule, not when desperate. A polite reminder the day after due date, a phone call a week later. Consistency gets you paid first when a client is juggling bills.
- Put tax and GST aside as you go. A separate account, a fixed percentage of every payment, moved the day it lands. The tax bill stops being a crisis and becomes a transfer.
Know your danger number
Every trade business has a number: what it costs to exist for a month, wages, vehicles, insurances, the lot. Know yours, and keep a buffer of a few months of it in the account. That buffer is what turns a slow month from an emergency into an annoyance, and it’s what gives you the power to say no to bad work. Desperate businesses take bad jobs. Buffered businesses choose good ones.
The mindset shift
Cash flow isn’t an accounting topic, it’s a wellbeing topic. Every tradie we’ve worked with who fixed their cash flow says the same thing: they sleep again. The 3am maths stops. If money stress is the background noise of your life right now, that’s exactly the conversation to have in a free strategy session. We’ll find where the cash is leaking and plug it, usually in weeks, not months.
Founder of Tradie 1. Qualified builder and industry trainer who has built, sold and rebuilt trade businesses in Australia and abroad. Read Jason’s story or book a free strategy session.
