Accounting & Finance

7 Cash Flow Management Tips for Tradies

Written by Sue Hirst

When you set out to learn a trade and start your own business, the satisfaction of working with your hands and building great relationships with your clients probably sounded like a dream. You might not have anticipated unexpected challenges associated with running a small business. 

Many small business owners admit that they regularly struggle with cash flow issues. However, it’s not an unsolvable issue. Want to learn how to best manage the financial aspects of your business? Keep reading for some handy tips. 

Request a Deposit

Requesting an up-front deposit is common practice for many tradesmen, and for good reason: if you allow clients to delay paying your fees, they will, and half-done jobs don’t pay the bills. 

Getting a deposit upfront protects you from spending money on equipment or materials before you know that your client is serious. Once people have placed a deposit, it’s in their best interest to see it through. This reliability allows you to be confident that there will be a profit at the end of the job. 

Choose your Equipment Wisely 

It may be a cliche, but a bad workman really does blame his tools. If you know you need particular tools or equipment in order to produce the quality of work your clients expect, investing in anything else will be setting yourself up for failure. Plus, high-quality tools generally come with extended warranties, which is great for your peace of mind. 

On the other hand, if you find that you’re spending too much on tools, you have two options: investigate similar options with lower prices, or raise your prices to cover your costs. 

You’ll find that even the most budget-conscious customer is keen to make sure the job is done properly and will be willing to pay a fair price for work that lasts. 

Create a Reliable System 

There’s no such thing as total stability in business, a steadfast system can change the whole game. 

If you ask Sue Hirst from CFO On Call, organisation is the key to just about every element of your success, from arranging supply deliveries to organising quotes and anticipating payments. 

“Have a system so that you know your materials, overheads and labour for each job. This will help you determine the profit you will make when doing the quote,” Sue says. 

“At a minimum, you need a cash flow spreadsheet, but if you want something more user-friendly and convenient, invest in cash flow software.” 

Any business owner will agree that learning to manage business finances is a process, but it doesn’t have to be painful – in fact, it can be surprisingly profitable. 

Get Invoice Intelligent

When the time comes to send an invoice and actually get paid, you would think most business owners would be stoked – but if you have been in business for a while, you will know something amateurs don’t. Sending, checking, and chasing after invoices can create the kind of headache that no hard hat can prevent. 

Try creating a regular schedule for sending your invoices. For example, you might declare the last day of each month to be invoice day, and stick to it. 

Consider changing your invoice payment terms. If you want to even out your cash flow and keep your bank balance above zero, a new fortnightly schedule might be in order. 

Incentivise Early Payments 

So you changed your payment terms and you’re still waiting on overdue invoice payments from last month? 

Think back to all the times you’ve received a bill for your car registration or your insurance. Often, there will be an amount listed for people who pay on time and another (larger) amount for people who pay late. The idea of paying extra is usually enough to get most people over the line on time, and your customers are no different. 

Once you start offering a “discount” for early payments (or raising the prices for late payments), you might be surprised at how many people begin to pay on time.  

Sort your Workflow 

A business budget that works is a great thing, but it won’t do you much good without a thorough understanding of your workflow. Whether you’re operating solo or employing a team of contractors, everything you do should be geared towards managing your workflow. 

The bottom line is, you need to know how much work you have coming up. This will allow you to plan ahead, and reduce stress. 

Spread Out Costs 

The secrets to building wealth and managing spending for positive cash flow are one and the same: it’s all about diversification. 

Buying business supplies with cash might seem like a good idea because you’re avoiding interest charges – and it is, at least until you find yourself in need of a cash injection to cover  unanticipated costs. 

The solution? Don’t be afraid to take out loans or use credit to finance your everyday equipment purchases, and save your cash for when you really need it. 

In most cases, the difference between successful and unsuccessful cash flow management for tradies comes down to what and who you know. With the right people in your network and a few basic tools for understanding the numbers, it won’t be long before you’ve got cash flow under control. 

“The opinions expressed by BizWitty Contributors are their own, not those of BizCover and should not be relied upon in place of appropriate professional advice. Please read our full disclaimer."

About the author


Sue Hirst

Sue was managing an accounting practice when she co-founded the business in 1991. She has expertise in financial management, product and service development and human resource management. Sue is passionate about explaining accounting concepts in clear English so business owners can make sense of their own numbers.