Three Warning Signs Your Trade Business Cash Flow is Heading for Trouble

One of the biggest red flags is needing to dip into your personal savings just to cover the cost of materials for a new job. If your business isn't generating enough cash to pay for its own supplies, you are essentially subsidizing your work with your own money. This is a clear sign that your markup strategy or payment terms need a serious review.

Another major warning sign is when your accounts receivable list is consistently dominated by invoices that are more than 30 days overdue. When clients aren't paying on time, your ability to meet your own payroll and tax obligations is compromised. Implementing a strict system for sending payment reminders early can prevent this bottleneck before it chokes your operation.

You should also be worried if you find yourself unable to predict your tax obligations throughout the year. If you aren't setting aside money for GST and income tax as you go, you are setting yourself up for a nasty shock when your BAS or tax return is due. Always keep your tax reserves in a separate high-interest account so you aren't tempted to treat that money as profit.

Finally, check your job profitability reports to ensure you aren't losing money on every project. Sometimes tradies are so busy winning quotes that they forget to factor in overheads like fuel, insurance, and interest payments on loans. Taking a step back to audit your last five jobs will tell you exactly where your margins are disappearing and how to fix them.