How Can I Tell If I’ve Got Enough Cash to Take On a Big Job?

Taking on a big project can transform your construction business — or cripple it. Before you say yes, you need to know if your business has the cash strength to support the project from start to finish.

Here’s how to make that call with confidence.

---

What Does “Enough Cash” Actually Mean in Construction?

In simple terms: You’ve got enough cash when your business can pay all project-related costs — materials, labour, and overhead — before the client pays you, without starving your other jobs of funds.

In construction, that often means funding 30–60 days of work before you see a single pound in. For example:

• A £250,000 job with 40% materials up front = £100,000 outlay before the first payment.

• If your average client pays on 45-day terms, you could be £100,000–£150,000 out of pocket for six weeks.

That’s why cashflow forecasting is more important than “profitability” when you’re scaling up.

---

How to Forecast Cashflow for a Big Job

Step 1 – Map the project timeline and payment schedule.
Create a cashflow calendar: show when supplier invoices fall due, when labour is paid, and when stage payments are expected.

Step 2 – Factor in VAT and retentions.
VAT can distort your cashflow — you might pay it before reclaiming it. Retentions delay income even further.

Step 3 – Stress test your forecast.
Ask:

• What if the client delays payment by two weeks?

• What if materials rise 5% mid-project?

• What if your other jobs also need cash at the same time?

Your Virtual Finance Office (VFO) team at Thomas Emlyn Ltd can model these “what if” scenarios quickly, showing how sensitive your cash position really is.

---

How to Calculate Your Working Capital Position

Your working capital is the difference between what you own short-term (cash, receivables) and what you owe short-term (creditors, tax, loans due).

Formula:

Working Capital = Current Assets – Current Liabilities

If your figure is positive and comfortably covers 2–3 months of overheads, you’re generally in a healthy position to take on larger work.
If it’s negative or tight, you’re operating on borrowed time (literally).

Example:

That £70,000 buffer might be enough for smaller projects but risky for a £400k job with long payment terms.

---

Why Margins Alone Don’t Guarantee You Can Afford It

Many construction owners assume, “If it’s profitable, it’s fine.”
But margin doesn’t equal liquidity. You can make 20% profit on paper and still run out of cash.

Here’s why:

• Timing: Profit is recorded when earned, not when paid.

• Retention: 2.5 – 5% may be held for months.

• Suppliers: Demand payment before you’re paid.

• Payroll: Non-negotiable weekly costs.

At Thomas Emlyn Ltd, we’ve seen firms lose money on “profitable” projects simply because their cash cycle couldn’t sustain the job.

---

What Are Early Warning Signs You Can’t Afford It?

Watch for these red flags before committing:

• You’re regularly dipping into overdraft.

• You’re delaying VAT or CIS payments to fund jobs.

• Supplier credit limits are maxed.

• You can’t produce a 90-day cashflow forecast with confidence.

• You’re relying on one big client to keep the lights on.

If this sounds familiar, a Virtual Finance Director (VFD) review can help stabilise your position before growth.

---

How to Strengthen Cashflow Before Taking On Bigger Projects

1. Negotiate better payment terms.
Request shorter payment intervals or deposits. Stage billing aligned with material drawdown reduces exposure.

2. Build a project-specific cash reserve.
Set aside 10–15% of the project value in advance to handle delays or material hikes.

3. Use project-level cashflow tracking.
Platforms like Fathom or Float integrate with Xero and can show how each job affects your bank balance weekly.

4. Review overhead efficiency.
A 5% reduction in fixed costs across the year could release enough to fund the next job upfront.

5. Work with a Virtual Finance Office (VFO).
Your VFO monitors cash movement daily — not just quarterly — and gives you a live view of affordability before you commit.

---

Case Example:

A groundworks firm came to Thomas Emlyn Ltd considering a £600k council contract. On paper, it looked profitable — 18% gross margin.
Our forecast showed they’d need £220k upfront for materials and labour before the first payment, creating a 5-week cash gap.

Solution:

• We staggered supplier payments with extended credit (30→45 days).

• Introduced a deposit clause for mobilisation costs.

• Built a rolling 13-week forecast and weekly cashflow review.

Result: The job went ahead smoothly, margins held at 19%, and they gained the council as a repeat client — without borrowing.

---

Why Cash Visibility Builds Confidence and Growth

When you have real-time visibility of your cash position, you stop guessing.
You start making decisions like a finance director, not just a project manager.

That’s where Thomas Emlyn Ltd adds value — we translate your project forecasts, supplier payments, and VAT cycles into clear decisions:

• Can you afford that next contract?

• Will your cash dip below safe levels?

• Where can you release trapped working capital?

---

FAQs: Construction Cashflow and Project Affordability

1. How far ahead should I forecast cashflow for my construction business?

At least 13 weeks ahead. This covers payroll cycles, VAT, and material lead times. Larger firms often plan 26–52 weeksusing rolling forecasts.

2. What’s the difference between profit and cashflow?

Profit shows if a job makes money on paper.
Cashflow shows if you can pay your bills on time.
Many firms collapse while profitable because their cashflow timing fails.

3. Should I use financing for large jobs?

Short-term financing (invoice finance or overdraft) can help bridge timing gaps, but it’s a safety net — not a strategy. If every big job relies on credit, your model needs review.

4. How can a Virtual Finance Office help?

A VFO from Thomas Emlyn Ltd gives you live dashboards, forecasts, and meeting rhythms so you always know what’s coming. You make confident calls, backed by numbers — not gut feel.

5. What’s one simple metric to watch weekly?

Your cash runway — how many weeks you can operate if no payments come in.
Aim for at least 6–8 weeks.

---

Final Thought

If you’re unsure whether your next project is financially safe to take on, you probably need clearer data — not just more courage.
The smartest construction directors make growth decisions with numbers, not nerves.

To discuss your own cash position or set up a Virtual Finance Office for your business, book a discovery call here.

---

Thomas Emlyn Ltd
Stronger Margins – Healthier Cashflow – Sustainable Growth