Cash flow advice for construction businesses

A construction business can be profitable on paper and still run out of cash — because profit is recognised when work is done, but cash moves on a completely different schedule shaped by payment terms, retention, and how many jobs are running at once.

The gap between spend and payment

Materials and subcontractors are often paid faster than a main contract pays out — 30-day supplier terms against a client who pays on 60-day certified valuations creates a structural gap that has nothing to do with whether the job is profitable. That gap has to be funded from somewhere, and it's worth sizing deliberately rather than discovering it.

Retention is cash flow, not just a balance sheet line

Money held as retention across several concurrent jobs adds up, and it's easy to lose track of how much is sitting with clients waiting for a defects-period release. Knowing the total retention currently outstanding — and when each release is actually due — turns it from a vague expectation into something you can plan around.

Running multiple jobs multiplies the timing risk, not just the workload

Two jobs each individually fine on payment terms can still create a cash crunch if their low points happen to land in the same month. Looking at the combined outgoing commitments across every live job — not just each job in isolation — is what catches this before it becomes a real shortfall.

Practical levers that actually help

• Invoice promptly and on the agreed valuation dates — a delayed invoice is a delayed payment, entirely self-inflicted.
• Negotiate supplier terms in line with client payment terms where possible, rather than accepting whatever the default is.
• Keep a rolling view of what's owed to you and what you owe, not just a bank balance — the balance tells you where you are, not where you're about to be.
• Chase overdue payments early and consistently — the first missed date is the easiest one to recover from.