In the trade industry, cash flow is vital; it’s what keeps your business afloat in an already thriving and competitive ecosystem. Without a steady flow of money coming in, there won’t be enough to cover all your costs, which only leads to trouble. The goal is not to let this happen, which is why managing cash flow for small business owners is hugely important.
How payments affect small business cash flow
While working a flexible job in a skill you love has its benefits, there are some unexpected challenges you should be aware of. The trade industry can be unpredictable, with workloads and payments varying widely from month to month. During busy periods, you may be overworked and get paid on the earlier side, while in other months, you may have fewer jobs to complete and more late payments from clients. This inconsistency in cash flow can put significant pressure on small businesses.
Without careful planning and saving during peak times, many tradies struggle to cover essential expenses when work slows down. If you have rent, employee wages, and bills due immediately, money arriving later won’t solve the problem. This cash flow gap can leave trade businesses in a tough spot, unable to meet their financial obligations when they need to the most.
While short-term loans are an option if needed, they come with risks. A loan can help cover short-term expenses during slow periods, but it adds another financial obligation. If cash flow doesn’t improve or you face unexpected expenses, the debt can quickly become a burden, making it harder to stay stable.
5 ways to improve cash flow in small businesses
As a tradie, it’s often out of your control how clients behave, but it is in your control how you manage your money. Here’s how you can improve cash flow.
Tip 1: Ask for a deposit prior to starting work
Requesting an upfront deposit is one of the best ways to ensure a timely payment and improve business cash flow. This approach works particularly well for long-term projects that span weeks or months, as it provides immediate access to a portion of the funds. This not only helps cover the cost of materials and employee wages but also creates a sense of financial security.
It’s a win-win: tradies feel confident about getting paid, and clients benefit from breaking the total payment into manageable instalments rather than a single lump sum. For example, you could charge an upfront amount (like 10% for example) when the customer accepts your quote, another 50% when work begins, and the remaining balance upon project completion. Getting a deposit before starting the work secures the client and confirms their ability to pay.
Tip 2: Invoice your clients regularly
Another helpful tip is to send invoices consistently at the same time after completing work. A great way to start doing this is by setting a reminder, whether it be at the end of a working week or during the first day of a month.
Even better, send your invoice as soon as a job is complete to give clients an easy and instant way to pay. To incentivise clients to pay on time, you could also offer discounted early payments or raise prices for late payments. By planning ahead, you’ll be keeping yourself accountable. Avoid sending your invoices late or sporadically, as it demonstrates that you aren’t on top of your work as much as you could be.
Establishing this routine creates predictability for both you and your client, so both parties know exactly when to expect an invoice. Over time, this habit helps clients become more prepared to make payments on time. This ultimately reduces delays and streamlines your small business cash flow.
Tip 3: Have a record of payments
As a tradie running your own business, there is a lot to track. You must have an organised system in place to log all overheads, labour costs, or inventory checks so there’s a baseline of how much is usually spent and where you can afford to spend more.
Hiring an accountant is a great investment, but if your business isn’t at that stage yet, you can still stay on top of your tradie finances using an accounting platform or an online tool. A record of payments that you can easily see gives you a clearer picture of where your money is going.
Tip 4: Prioritise the most important payments and scale smartly
As bills come in, prioritise what needs to be paid first. If you’re tight on money, only pay what’s necessary and save what can wait for later. For suppliers, consider setting up a payment plan that aligns with when your clients pay you, reducing the strain on your cash flow.
Be mindful of due dates—paying bills late can lead to costly fees that make the total even harder to manage. Staying proactive with payments helps avoid unnecessary expenses and keeps your tradie finances on track.
Plan how much work you have coming each month and estimate how much income it will generate. If you’re very busy in one month, consider hiring a contractor to help manage the extra demand. However, if your work slows down in other months, it might indicate that hiring a full-time employee isn’t the right move. Same goes for equipment: only purchase if you have the budget for it. If not, explore other alternatives such as borrowing or leasing.
Tip 5: Save for a ‘rainy day’
As best as you can, have some savings stacked up. A savings account can really help when money gets tight. Every time you get paid, store a small portion of the money away in a ‘rainy day’ savings account. This type of account is focused on saving for times when things don’t go to plan or there are unforeseen circumstances. No matter what happens — if your car breaks down or your machinery malfunctions — you’ll always have some extra funds to help you through.
Saving for a ‘rainy day’ doesn’t have to be complicated either; it’s about making the most of unexpected savings. For instance, if materials cost less than you budgeted for, set aside the difference. If you usually hire a contractor but don’t need their help for a month, put that unspent money straight into savings. Small, consistent actions like these can help you build a financial cushion for when you need it most.
The secret to building wealth and managing spending for positive cash flow is spreading out your costs and not purchasing things all at once. Start by buying some materials and then using them until you’ve saved up again. Once you have enough to spend again, that’s when it would be a good idea. Replenish, replenish, replenish, so you can consistently see a return on your investment.
Track your cashflow from your pocket
At the end of the day, a small trade business truly thrives best when it's managed well. With a variety of factors going on, keeping track of your cash flow is essential for staying in control of your finances.
With the right tools, you can monitor your income, spot trends, and make informed decisions right from your pocket. Mira, our all-in-one software for tradies, is the perfect way to accurately track your business needs, offering cash flow management for small business owners and much more. Whether in the office, on-site, or working remotely, Mira helps you stay prepared for any bills and payments coming your way. With Mira, you can see all your current finances at a glance and also forecast where you’re going to go next.
If you’d like to calculate your potential earnings before or after a job, we also offer a free profit margin calculator. You can also start a free trial to check out Mira’s automated invoicing and quoting features, and its integration with accounting platforms such as Xero or QuickBooks.
Stay on top of your finances straight through your phone with Mira!