The Cash Flow Trap
You're busy. Work is coming in. But somehow you're always waiting on payments, stressing about bills, and living job-to-job.
This is the cash flow trap, and it catches more tradies than any other business problem.
Why Cash Flow Is Different From Profit
You can be profitable on paper and still run out of cash:
- Invoice a $5,000 job in February
- Get paid in April
- Rent, fuel, and suppliers are due in March
- Cash crisis—even though you're "making money"
Cash flow is about timing. Profit is about totals. You need both.
7 Cash Flow Strategies for Tradies
1. Get Paid Faster
- Invoice immediately: Send invoices the day the job is done, not "when you get around to it"
- Take payment on-site: Card readers and bank transfers work great
- Offer BPAY and card: Make it easy for customers to pay
- Follow up unpaid invoices: Day 1, day 7, day 14—be consistent
2. Deposits on Bigger Jobs
For any job over $1,000, require a deposit:
- 30-50% upfront for materials and booking
- Progress payments for longer jobs
- Balance on completion
This protects you from cancellations and covers your outlays.
3. Shorter Payment Terms
Move from 30-day terms to:
- 7-day terms for residential
- 14-day terms for commercial
- Due on completion for smaller jobs
State payment terms clearly on every quote and invoice.
4. Build a Cash Buffer
Target: 3 months of expenses in a separate account.
- Calculate your monthly fixed costs (ute, insurance, phone, software)
- Multiply by 3
- Put a portion of every payment into a savings account until you hit that number
This buffer means slow periods don't become crises.
5. Negotiate Supplier Terms
- Ask for 30-day accounts with regular suppliers
- Buy materials on credit, get paid by customer, then pay supplier
- Maintain good relationships—pay on time to keep terms available
6. Track Your Cash Weekly
Every Monday, know:
- What's in the bank
- What's coming in (invoices due)
- What's going out (bills due)
No surprises. Xero dashboard makes this easy.
7. Tax Set-Asides
The #1 cash flow killer for tradies: unexpected tax bills.
Fix: Put 25-30% of every payment into a separate tax account. Don't touch it. When BAS or tax time comes, the money is there.
Warning Signs of Cash Flow Problems
- Waiting for payment before buying materials
- Choosing which bills to pay and which to delay
- Overdraft or credit card creeping up
- Stress about payroll (if you have employees)
- Taking jobs you don't want because you need the money now
If you recognize these, it's time to act.
The Goal
Financial confidence means:
- 3 months of expenses in savings
- Invoices paid within 14 days on average
- Tax money set aside and untouched
- Clear visibility of what's coming in and going out
It takes time to build, but it transforms how you feel about your business.
The Bottom Line
Cash flow problems are solvable. Get paid faster, save consistently, and track weekly. In 6-12 months, you'll go from stressed to stable.