Good tradesman cash management

Posted on: 31 January 2014

When your business is busy the adminstration work can easily be neglected. However, managing your cash flow is essential for your trade business's survival.

In the same way that your personal finances should be reviewed, so does the cash you work so hard to earn. So here are our six recommendations for looking after your cash this year so that it sees you through to next.

Look back:

  • Learn from the last few years’ trading in your business to get an idea of when there were peaks and troughs in work, what type of work was most profitable and why cash was difficult to manage on some jobs and not others. But don’t get blinded by any data – use your instinct to make informed conclusions about what really happened.
  • Public holidays like Christmas and Easter mean that payments in and out will have been different to more typical months. So look at the impact of these on your daily bank balance and the timing of outgoings like wages, loan repayments and premiums like business van insurance or tradesman insurance.
  • Review how promptly you received payment from debtors, the terms of payment your suppliers gave you and when you actually paid. Find out where you made short-term cash savings and decide if they paid off for the business longer-term.


  • Make a monthly cash flow forecast for the year ahead. If you don’t have accounting software, use a simple template like the one we have provided for you here.
  • This ensures you have enough money in the bank to stock up for a big job. It also helps you spot trouble coming before your bank balance runs into the red and you have to buy an expensive last minute loan or, worse still, cease trading during a busy time of the year.


  • If necessary, ask your suppliers for longer payment terms and find out if you can temporarily lower monthly repayments on long term debts. Choose which bills you’re going to pay first. And there’s no harm in asking creditors if you can skip a payment, make a partial payment or lengthen your payment terms. They can only say no.
  • If you’re choosing new suppliers, don’t automatically go for the cheapest option – those offering more flexible payment terms may be better for your business in the long term.
  • And make the most of electronic banking by paying bills online on the last day they’re due.

Debtor management:

  • When a job is complete don’t delay in invoicing your customers. Make the payment terms clear on the invoice, but if payment is late, make polite enquiries as to when payment should be expected.
  • Remember that many people go away over Christmas, Easter and in August, so call them in advance to find out when they hope to pay your invoices.
  • If cash is particularly tight or it’s a large and lengthy job, consider requesting an up front deposit or interim payments. But don’t jeopardise your relationship with a new customer – they may want to see the quality of your work before handing over any money.


  • Having cash tied up in supplies can be a tradesman’s worst nightmare, especially if it also costs money to store it. And cash tied up in equipment that is no longer used renders it useless. So regularly review your levels of supplies and equipment and consider selling some on if necessary.
  • Before buying new tools and equipment, compare the cost of repairing old kit and regularly servicing it with the purchase or lease of newer models. You may be surprised at how much more you can get out of existing gear if you schedule in regular maintenance.


  • Arrange a loan or increased overdraft with your bank manager long before cash actually becomes tight, and only use it if you need it. They’re more likely to oblige if there’s no immediate need from the business.
  • Prepare for interruptions to trade, such as from bad weather, by knowing how you would manage your cashflow if you couldn’t work and what steps you could take to get back up and running as quickly as possible. And don’t forget that small business insurance can help you recover from lost income.

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Business Guidance

Good tradesman cash management

31 January 2014

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