Why Do I Never Seem to Have Money in the Bank, Even When We’re Busy?
Busy doesn’t always mean profitable — especially in construction.
At Thomas Emlyn Ltd, we specialise in construction cashflow management, helping busy contractors understand why the bank balance never matches the workload. Even when projects are flying, cash can quietly disappear — and it’s rarely because of poor sales.
So, why does this happen — and how do you fix it?
Let’s break it down. Or book a discovery call here to talk to us directly.
What causes cashflow problems when business is booming?
Direct answer (45 words):
Most construction companies run out of cash because their profits are tied up in projects, not in the bank. Timing gaps between invoicing, payments, materials, and labour mean cash leaves before it arrives — even when work is profitable on paper.
Here’s how it plays out in real life:
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You pay subcontractors weekly, but clients pay you 45–60 days later.
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You buy materials upfront, often on card or short supplier terms.
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Variations and retentions delay payment further.
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You’re “busy”, but cash is constantly trapped in the job cycle.
When that happens, it’s not a sales problem — it’s a cash conversion problem.
How does job costing affect your cashflow?
Direct answer (50 words):
If you don’t know the true cost of each job — including labour, materials, overheads, and wasted time — you can’t see where your profit is going. Under-costing even one element can quietly drain cash, especially when multiplied across several sites.
Common mistakes we see:
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Site wages not linked to job costing (so labour looks lower than it is).
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Overheads excluded from job costs (fuel, insurance, admin time).
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Variations priced too late, so materials and labour are already paid for.
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Untracked rework eats margins without showing up in reports.
👉 Example: One client was making 20% gross profit on paper, but after overhead allocation and site rework, true net profit was closer to 6%. Once we tightened job tracking and payroll links in Xero, they freed up £80,000 in working capital within three months.
Why “profit” doesn’t always mean cash
Direct answer (45 words):
Profit is a paper figure; cashflow is reality. You can make a profit on a job but still have no money if income and outgoings don’t align. Cashflow dips happen because profit recognition and payment timing are rarely synced in construction.
Example:
| Stage | Action | Cash Impact |
|---|---|---|
| Week 1 | Materials ordered (£15k) | -£15k |
| Week 2 | Labour costs (£10k) | -£10k |
| Week 6 | Invoice raised (£30k) | £0 (not yet paid) |
| Week 10 | Client pays | +£30k |
In that four-week gap, you’re £25k out of pocket — and that’s before overheads. Multiply that across five jobs, and you can see why the account’s empty even when turnover’s up.
How to manage construction cashflow better
Direct answer (55 words):
Successful firms manage cashflow deliberately — not reactively. That means forecasting cash in and out, aligning project payments, and building a financial rhythm that supports your workload.
Practical steps:
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Build a 13-week cashflow forecast — update weekly.
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Negotiate stage payments with shorter gaps.
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Invoice variations immediately, not at the end.
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Track job-level margins using software like Xero Projects or Simpro.
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Separate VAT and tax accounts — never rely on that balance for spending.
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Review WIP (Work In Progress) monthly to know what’s tied up in jobs.
At Thomas Emlyn Ltd, we implement this through our Virtual Finance Office, where your bookkeeping, payroll, reporting, and forecasting all align to keep your bank balance healthy.
What’s the real reason your bank balance never seems to grow?
Direct answer (40 words):
Most construction owners don’t have a clear view of cashflow. They make decisions from the P&L instead of the bank forecast. The cure isn’t working harder — it’s building a financial system that shows what’s coming next.
That’s where strategic finance comes in.
Our Virtual Finance Director service helps you move beyond reactive bookkeeping to proactive decision-making:
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Predict cash gaps before they hit.
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Set profit targets that actually translate to cash.
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Monitor gross margin trends monthly.
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Build a “cash reserve plan” that smooths quiet months.
One client went from constantly borrowing to a steady £150k cash buffer within nine months — without adding a single new project.
How to turn “busy” into “profitable”
Direct answer (50 words):
The difference between busy and profitable is control. When you understand your numbers weekly, manage job margins tightly, and forecast cash clearly, you shift from chasing projects to building profit intentionally.
Ask yourself:
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Do I know my margin per site?
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Can I predict my bank balance 8 weeks ahead?
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Do I have cash targets — not just sales targets?
If not, that’s your next step.
FAQs: Construction Cashflow Explained
1. What’s the best way to improve construction cashflow quickly?
Start with visibility. Build a 13-week cashflow forecast and review it weekly. Chase payments daily, invoice promptly, and reduce the lag between project completion and payment. Even simple tweaks like invoicing variations immediately can improve cash position within a month.
2. Should I focus on profit or cash first?
Cash first. Without cash, you can’t survive long enough to fix profit. Once cashflow stabilises, focus on margin improvement and pricing strategy. Both are essential, but cashflow management is what keeps your business breathing.
3. How can I stop using VAT money by mistake?
Open a separate VAT account and move the VAT portion of every invoice immediately. It’s simple discipline that prevents panic when the return’s due. Most firms we work with free up £20–50k in peace of mind doing this alone.
4. Do I need a Virtual Finance Office or just a bookkeeper?
A bookkeeper records what’s happened.
A Virtual Finance Office (VFO) helps you plan what’s coming — integrating bookkeeping, forecasting, job reporting, and management meetings. If you’re scaling or want control over your cash position, a VFO is the smarter choice.
5. How do I know if my margins are healthy?
In UK construction, healthy net profit typically sits around 8–15% depending on project type. If your margins are below 5% or fluctuate wildly, it’s a sign to review pricing, overhead recovery, and job performance tracking.
