5 common cash flow mistakes trades businesses make – and how to fix them?

Cash flow can make or break a trades business, yet many owners unknowingly make simple mistakes that lead to financial stress.

Avoid underquoting for jobs

One of the most common errors is underquoting jobs. Tradies often underestimate costs or fail to factor in all overheads like travel, materials, or equipment maintenance, which eats into your profits. A detailed quoting process that accounts for all costs, including a margin for unexpected expenses, can safeguard your business and protect your bottom line. Regularly reviewing and updating your pricing structure as material and labour costs change ensures you stay competitive and profitable.

Tackle late payments effectively

Late payments are another cash flow killer. Tradies and many small businesses often face delays from customers, leaving them scrambling to cover their own bills. Clear invoicing terms, automated reminders, and late payment fees can encourage clients to pay on time. Offering incentives, such as small discounts for early payments, can also improve cash flow consistency. If overdue payments are a recurring or sometimes unavoidable issue (weather and other delays etc), you could consider using invoice financing or a collections agency to recover funds while keeping your business running smoothly.

Understand the cash flow cycle

Many small businesses overlook the importance of the cash flow cycle. Without understanding when money comes in and goes out, it’s easy to run short when bills are due. A cash flow forecast can help you anticipate periods of low income and plan accordingly. Tools like cash flow management software or spreadsheets can simplify the process, allowing you to identify potential gaps and adjust your strategies proactively.

Track expenses in real-time

Real-time expense tracking is equally essential, as unchecked spending can drain your cash reserves faster than you realise. Use software or mobile apps to log expenses as they occur, ensuring you stay on top of your outgoings.

Build a financial buffer

Finally, too few small businesses maintain a financial buffer. Try building yourself up a bit of a safety net to give you breathing room during slow periods or emergencies. Whether it’s setting aside a percentage of each invoice or a fixed amount each week (say when you process the payroll) these steps can ensure you’re prepared for any financial challenge and build a more resilient business.

Don’t let cash flow mistakes hold your business back. Learn how to master your finances with the the AccNav Small Business Foundations Course or the Ultimate Bookkeeping Series. Set your trades business up for long-term success with the right tools and strategies. Start now!