Struggling with cashflow, month after month?
You’re not alone. For many custom home builders like you, cashflow is the invisible hand that holds back growth, stress-free projects, and the lifestyle you deserve.
High upfront costs… unpredictable payments… timelines that stretch endlessly — it’s exhausting. And even when your books show profit, the reality is: cashflow problems can stall your business and pile up pressure on your personal life.
When the bills keep coming, but the payments aren’t, it doesn’t just hurt your business… it hurts you.
But here’s the good news — you can fix it.
In this guide, you’ll uncover proven strategies to master construction cashflow so that you can grow your business confidently, and, most importantly, stop the financial stress that’s keeping you up at night. With the right approach, you can solve your cashflow problems and gain control over your finances.
Disclaimer: The information provided in this article does not constitute financial advice. It is not tailored to your personal financial situation and should not be considered a substitute for professional advice. Before making any financial decisions, you should consult a professional.
Confusing cashflow with profit? It’s a costly mistake.
Too many builders see profit and think they’re in the clear. But profit is just a number on paper. Cashflow is what keeps your business alive. Without a steady flow of cash, your projects grind to a halt. You can’t pay your suppliers. You lose credibility with your subcontractors. And your dreams of expansion? Those fall apart too.
While profit represents the money left over after deducting all expenses, cashflow refers to the actual movement of money into and out of your business. This includes all payments received and expenses paid, regardless of when they were earned or incurred.
Misunderstanding this distinction can lead to financial strain, project delays, and strained relationships with suppliers. By recognising cashflow problems early — such as delayed client payments or unexpected costs — you can take proactive steps to manage cashflow effectively and prevent disruptions that could impact your business.
You might be profitable on paper, but if your cashflow isn’t steady, it’s only a matter of time before the cracks start to show. In fact, cashflow issues often sneak up on builders who are focused on chasing revenue but miss the red flags until it’s too late.
So, how do you know if cashflow problems are lurking in your business? Look out for these early warning signs:
If your receivables are growing but the money isn’t hitting your bank account, you have a cashflow issue. Outstanding invoices are useless until they’re paid, and waiting too long can strain your cash reserves, halting your progress.
Ignoring these warning signs won’t just slow down your business — it could bring everything to a halt. When you address cashflow problems early, you prevent them from snowballing into missed payments, damaged supplier relationships, and project delays that can cost you far more than just money.
Identify the red flags early, make adjustments, and regain control of your cashflow before these problems disrupt your business and your peace of mind.
Here’s where most builders fail: they don’t have a system in place to keep cash flowing. Without proper management, even profitable companies can face cash shortages at critical moments. Implementing these key management techniques will help you avoid financial pitfalls and keep projects running smoothly.
Setting clear payment terms in your contracts is essential for ensuring timely payments and maintaining steady cashflow throughout your projects. Make sure you outline payment schedules with specific due dates for each milestone, and include clauses for penalties on late payments or incentives for early ones. Clear communication of these terms to both clients and subcontractors helps avoid disputes and ensures everyone understands their financial responsibilities.
To further safeguard your business, have your contracts reviewed by a legal professional to ensure compliance with local regulations and to make sure they’re enforceable if needed.
Automating your invoicing process is a smart way to reduce delays and improve construction cashflow. Accounting software like QuickBooks or Xero can help you schedule follow-ups and reminders, making sure clients adhere to payment schedules. Automation not only frees up your time but also helps prevent missed payments by keeping receivables in check.
Regularly communicating your payment expectations and following up with clients reduces the risk of overdue payments. Additionally, reviewing your financial statements ensures you stay aware of your cashflow position and any outstanding invoices.
Balancing your incoming payments with outgoing expenses is key to keeping your cashflow healthy. To proactively manage receivables and payables, consider negotiating extended payment terms with suppliers that align with your cashflow cycles. For example, if you typically receive client payments 45 days after invoicing, aim to negotiate 60-day payment terms with suppliers.
Building strong relationships with your suppliers can also give you more flexibility during tough times. Consistently reviewing your supplier agreements and adjusting terms as needed helps prevent cash shortfalls and keeps your construction budgeting aligned with your financial goals.
While monitoring daily expenses is necessary, it’s not enough to ensure your building company’s long-term financial health. Taking a strategic, proactive approach to improve your cashflow helps you plan for future challenges and growth, ensuring stability and adaptability in the face of potential risks.
Cashflow forecasting is essential for both short-term and long-term financial planning. Creating a construction cashflow forecast helps identify potential issues early, so you can address them before they escalate into significant problems.
APB Member tools, such as the Construction Slot Planner and Revenue Forecaster, streamline this process, helping you predict cashflow fluctuations and schedule project timelines more effectively. Regularly updating these forecasts ensures you can make informed business decisions and prepare for financial obligations.
Strong, trusting relationships with suppliers and clients can provide flexibility during cashflow challenges. Open communication and transparency foster trust, which can lead to better payment terms and more lenient conditions when times are tough.
If you build rapport and establish reliable relationships, clients may be more inclined to pay promptly and suppliers may offer extended payment terms if needed. This trust not only eases financial pressure but also keeps projects moving smoothly, even when cashflow is tight.
Every successful business plans for growth as well as unexpected challenges. Setting aside cash reserves for seasonal slowdowns, growth periods, and unforeseen expenses is crucial to financial stability. We recommend saving at least three months' worth of fixed expenses as a contingency fund. If you haven’t already, take steps to fix your fixed expenses to ensure you’re fully prepared.
Additionally, scenario planning — preparing for best, worst, and most likely financial outcomes — helps you anticipate construction cashflow challenges and make adjustments before problems arise. Planning ahead ensures your business is prepared for any situation, from rapid growth to unexpected financial strain.
As your business grows, so do the complexities of managing cashflow. Advanced strategies allow you to fine-tune your financial planning so you can adjust in real-time, handle larger projects, and minimise risks. With these strategies, you can take greater control of your financial health and ensure your business continues to thrive.
Allocating funds as soon as revenue is received is essential for maintaining financial stability. By setting aside money for future expenses in dedicated accounts, you ensure that operational costs and project-related expenses are covered when they arise. For example, create separate accounts for daily business operations and specific project costs to prevent overspending and improve transparency.
This proactive approach also involves planning for large annual payments, such as insurance premiums or equipment maintenance, well in advance. By doing so, you can avoid cash shortfalls and financial strain when these significant expenses come due.
Consistently reviewing your cash position and reacting quickly to discrepancies or payment delays keeps your business on track and prevents unexpected financial setbacks.
Tools like the Work in Progress Accounting Adjustment (WIPAA) and a construction cashflow forecast allow you to track ongoing project expenses and adjust cashflow projections in real-time. By regularly updating WIPAA with project details — such as costs, payments received, and progress — you can make sure your cashflow planning reflects the true state of your finances.
Completing projects on time — or ahead of schedule — has a direct impact on construction cashflow. Timely project completion secures milestone payments faster and reduces carrying costs, such as labour and interest on borrowed funds. Choosing the right type of contract between fixed price or cost plus can also affect how you manage project expenses.
To keep projects on track, use detailed plans and management tools to monitor progress and address delays early. Structuring contracts with larger deposits and milestone payments helps maintain steady cashflow throughout the project lifecycle, reducing the risk of financial strain during longer builds.
Don’t let cashflow control you — take control of it.
APB’s specialised construction financials coaching gives custom home builders like you the proven systems to manage your cashflow with confidence. You’ll eliminate financial stress, keep projects moving, and finally get the respect (and profits) you’ve earned.
Ready to master cashflow and grow your business? Explore APB’s business coaching services today, and take the first step towards financial freedom.
Want to get started right away? Download our free resource on calculating your Work In Progress!