Why Do You Have £10,000 In The Bank One Week And Struggle To Pay Wages The Next?

I see this all the time. Cash Flow Management for Trade Businesses is a common challenge that many of my clients once faced.

A tradesman calls me in a panic.

“Daren, I’ve only got £2,000 left in the bank.”

The funny thing is, two weeks earlier he was showing me a screenshot of a bank account with £10,000, £20,000 or even £50,000 sitting in it.

So what happened?

Did sales suddenly dry up?

Did the business collapse overnight?

Usually not.

The real problem is this:

Your bank balance is not real-time profit.

And until you understand that, you’ll constantly feel like you’re riding a financial rollercoaster.

The Biggest Lie In Business

Most tradesmen manage their business by logging into their banking app.

If there’s money there, everything feels great.

If there isn’t, panic sets in.

The problem is your bank account only tells you what has happened.

It tells you absolutely nothing about what’s coming.

Imagine driving your van by looking only in the rear-view mirror.

Sounds ridiculous.

Yet that’s exactly how many business owners manage cash.

That £10,000 Was Never Yours

Let’s imagine your business bank account shows:

£10,000

Happy days.

Except…

You’ve got:

£4,000 wages due Friday

£2,500 VAT due next month

£1,500 materials ordered

£800 fuel and vehicle costs

£1,000 accountant, software and direct debits

Suddenly your £10,000 isn’t £10,000 at all.

It’s actually only £200.

The money sitting in the bank belonged to future expenses before it ever belonged to you.

And we haven’t even mentioned corporation tax or personal tax yet…..

Oh and PAYE for your guys needs paid too – Cash in bank is NOT real time!

Why Growing Businesses Often Have Worse Cash Flow

This one catches a lot of tradesmen out.

You land three big jobs.

Turnover doubles.

Everyone celebrates.

Then three months later you’re skint.

Why?

Because growth consumes cash.

You pay for:

Materials

Labour

Plant hire

Fuel

Waste

Subcontractors

Weeks before you receive the final payment.

The faster you grow, the more cash you often need.

That’s why many businesses fail during growth, not decline.

The Real Number You Should Track

Forget asking:

“How much money is in the bank?”

Start asking:

“How much committed cash do I have over the next 90 days?”

That’s a completely different question.

At TradeCoach, I encourage clients to build a simple cash flow forecast showing:

Money coming in

Money going out

Wages

VAT

Corporation tax

Materials

Vehicles

Loan repayments

Software

Everything.

Suddenly the future becomes visible.

And panic disappears.

it sounds like a LOT of work right? it’s not, it’s 5-10 minutes a MONTH once you have the right template (supplied in our OTT Programme) and know how to use said template (training within the course too)

Why Profit And Cash Are Different

Another huge mistake.

You can make a profit and still run out of cash.

Let’s say you complete a £20,000 project.

Fantastic.

On paper you’re profitable.

But if the customer doesn’t pay for 60 days while you’ve already paid wages and materials, your bank account can still be under pressure.

Profit is an accounting measure.

Cash is survival.

The TradeCoach Rule

Every trade business owner should know:

Current bank balance

Cash due in

Cash due out

VAT liability

Future wage commitments

Expected profit

If you don’t know those five numbers, you’re guessing.

And guessing with cash flow is one of the quickest ways to create stress in your business and is why it always feels like one step forward then two steps back!

How To Stop The Rollercoaster

The solution isn’t necessarily more work.

The solution is visibility.

Create a simple weekly cash flow forecast.

Review it every Friday.

Look 90 days ahead.

Know exactly what’s coming.

The business owner who plans three months ahead sleeps far better than the business owner checking their banking app every morning.

What needs to happen…

Simply put your need to understand your numbers, one of the biggest mindset shifts I teach tradesmen is this:

Money in the bank is not profit.

Money in the bank is simply money waiting to be allocated.

Some belongs to wages.

Some belongs to HMRC.

Some belongs to suppliers.

Some belongs to overheads.

Only when you understand what is truly available can you make good business decisions.

Because the goal isn’t to have a healthy bank balance today.

The goal is to have a healthy business six months from now.

And that starts with understanding your cash flow.

Frequently Asked Questions

Why is my business busy but I have no money?

Usually because cash flow is poor. Money is often tied up in unpaid invoices, upcoming wages, VAT liabilities and supplier payments.

How much cash should a trade business keep in reserve?

Ideally enough to cover at least one to three months of fixed business costs, including wages and overheads.

What is the difference between cash flow and profit?

Profit is what remains after expenses are deducted. Cash flow measures actual money moving in and out of the business.

How often should I review cash flow?

Weekly as a minimum. Many successful trade business owners review cash flow every Friday.

Related Resources

To Your Success

Daren