You don't need a complicated spreadsheet to manage cash flow in a building business. You need three numbers, checked every week: what clients owe you, what you've committed to spend but haven't been billed for yet, and whether the cash in the bank covers the next couple of pay runs. Get those in front of you every Monday and most cash flow surprises stop being surprises.
Most building company owners started as tradespeople. They're good at building things. They didn't get into this industry because they enjoy forecasting or reconciling accounts. But cash flow is what keeps the business alive between progress claims, and it's where most of the stress comes from.
Why cash flow hits builders differently
Construction has a cash flow pattern that most other industries don't. You pay for materials up front. You pay wages every week. You pay subcontractors on agreed terms. But you get paid in stages, and only after a claim is submitted, assessed and approved. Retentions hold back part of the money for months after the work is done.
The gap between money going out and money coming in is where businesses get into trouble. A profitable job can still leave you short of cash if a big claim is paid late or a variation sits unbilled.
This isn't a problem you solve by working harder. It's a timing problem, and the fix is being able to see it coming. You need to know, clearly and regularly, what's owed to you, what you owe others, and when both are due.
Three things to track every week
Forget complex cash flow models. Start with three numbers, reviewed every Monday morning:
- Claims submitted but not yet paid. This is money owed to you. Know the total, know the age of each claim, and chase anything that's past its due date. Under the security of payment laws in each state, there are deadlines for responding to and paying claims, so a late claim is worth a phone call.
- Committed costs not yet invoiced. These are purchase orders and subcontracts where the work is underway but the bills haven't arrived. This is money you will owe soon, and it's the number most builders forget.
- Cash in the bank versus the next two pay runs. Can you cover wages and the next lot of supplier payments without relying on a claim being paid on time?
If those three numbers look healthy, you can get on with running jobs. If one of them looks wrong, you know early enough to do something about it: chase a claim, talk to a supplier about timing, or hold off on a big purchase.
The tool doesn't matter. The habit does.
You can track this in Xero, in a shared spreadsheet, or on the back of a napkin. What matters is that someone in your business looks at these three numbers every single week. If you're using Xero or MYOB, most of the information is already there: unpaid invoices, bills, bank balances. The problem is usually that it's spread across several screens and reports, so nobody looks.
The goal is a one-page summary that's quick to read, not a job that eats a whole afternoon.
Making it automatic
Once the weekly habit is in place, the next step is to stop building the summary by hand:
- Use what your accounting software already does. Aged receivables, aged payables and bank balances are standard reports in Xero and MYOB. Save them as favourites so they're one click away.
- Get purchase orders into the system. Committed costs only show up if orders and subcontracts are entered somewhere, not just agreed on site or by email.
- Connect your job system to your accounts. If your job management or estimating software and your accounting software are connected, claims, orders and costs flow across without retyping. Then one report can be generated automatically and land in your inbox every Monday. We cover how this works in builder accounting software integration.
- Look further ahead when you're ready. A rolling forecast by job, built from your claim schedule and committed costs, shows the tight weeks before they arrive. See construction cash flow forecasting.
Frequently asked questions
What's the simplest cash flow report a builder should run?
A weekly summary of claims owed to you, committed costs not yet billed, and cash in the bank against upcoming wages. Those three numbers tell you most of what you need to know.
Can Xero or MYOB manage cash flow for a construction business?
They hold most of the data, such as unpaid invoices, bills and bank balances. What they usually don't show on their own is committed costs and claims by job, which is why many builders connect their job system to their accounts.
How often should I review cash flow?
Weekly. Monthly is too slow in construction, because a single late claim can change the picture within a fortnight.
Do I need a full-time bookkeeper to do this?
Not necessarily. Once the data is in one place and the report is automatic, an owner or office manager can review it in a short sit-down each week.
If cash flow keeps catching you out and your numbers live in too many places, book a free initial chat and we'll talk through what you've got and what would help.