Cash flow basics for trade businesses
Profitable businesses go broke waiting to be paid. Five habits that keep cash moving through a trade business, none of which require an accounting degree.
You can be profitable on paper and still miss payroll. Cash flow is the gap between doing the work and being paid for it, and in the trades that gap is wide: materials bought up front, labour paid weekly, invoices paid whenever the customer gets around to it.
Five habits that close the gap
- Take deposits. For any job with real material costs, a deposit before booking is normal and fair. A customer who won't pay a deposit is telling you something about the final invoice.
- Invoice the day the job finishes, not Friday, not month-end. Every day between completion and invoice is a free loan from you to your customer.
- Make paying effortless. A card link on the invoice gets paid from the couch that evening. Bank-transfer-only gets paid "when I'm next at the computer".
- Chase on a rhythm, automatically. The reminder that always arrives beats the phone call that sometimes happens.
- Stage payments on long jobs. Milestones tied to visible progress keep cash arriving as costs go out.
Know your number
One number is worth watching weekly: how many days, on average, between finishing a job and the money landing. Most owners guess it's about a week. It's usually three or four. Every habit above shortens it, and each day you shave off is cash that stops being borrowed.
GST deserves its own line: the GST you collect was never yours. Move it aside as it arrives (NZ 15%, AU 10%) and the quarterly bill stops being a crisis.
None of this is sophisticated finance. It's plumbing for money: make it flow in faster than it flows out, and keep the pipes visible so you spot the blockage before the flood.