A full order book and an empty account

The strangest thing about construction cash flow problems is that they usually turn up in a good year. The order book is full, the phone rings, the sites are moving, and there's still a Thursday every month where you're working out which supplier can wait another fortnight.

That isn't a sales problem and it isn't a discipline problem. It's the structure of the work: a builder pays for labour and materials weeks before the client pays for them, and every extra job widens the gap rather than closing it. This post walks through the 4 mechanisms that drain the account and the numbers that show the drain coming. It sits under the Adelaide trade business growth guide, which covers the wider picture of scaling without the business getting more fragile.

The order book is not the bank account

Growth in construction consumes cash. That's the sentence to sit with, because it's the opposite of what growth feels like.

Take on a job and you fund it first: materials, subcontractors, your own crew's wages, plant hire, site costs. The client pays in arrears against claims, and the last part of the money arrives after the job finishes, sometimes well after. So every new job pushes money out of the business before any of it comes back. Win 3 jobs at once and you've committed 3 jobs' worth of working capital, plus the 2 jobs already running.

This is why builders fail while busy. The insolvency pattern in South Australian construction is rarely an empty pipeline. It's work in progress that has been paid for in labour and materials and not yet paid for by the client.

Coaching, for the record, is not the same job as your accountant's. A coach works on the commercial rhythm: what you quote, when you claim, what you chase and how early you see the gap. The reporting, the compliance and the structuring sit with your accountant.

Progress claims: the gap between doing the work and being paid for it

The claim cycle is where most of the gap lives, and it's longer than it looks on paper.

Count the real elapsed time on your last job. Work is done through a month. The claim goes in at month end, or later if the paperwork slipped. It gets assessed, sometimes queried. The payment terms then start running from assessment, not from when the work happened. Add a public holiday or a client's accounts run and the money for work done in week 1 can land 9 or 10 weeks later.

Meanwhile the labour for that work was paid weekly or fortnightly, and the materials on a 30-day account.

There are 3 things that widen that gap, and all 3 sit inside your control.

• Late claims. A claim submitted 5 days late is paid 5 days late, every single time, and it compounds across every job on the go.
• Claims that get queried. Missing variation approvals, no photos, no breakdown. Every query resets the clock.
• Under-claiming early. Claiming less than the work completed in the first months to keep the client happy front-loads the funding burden onto you.

The fix is unglamorous: claim on a fixed day, claim everything completed, attach the evidence the first time, and treat the claim date as seriously as a site delivery.

Retentions: money you've earned and can't spend

Retention is a percentage of each claim held back by the client and released later, typically part at practical completion and part at the end of the defects period. On a run of jobs it quietly becomes a large amount of your money sitting in somebody else's account for a year or more.

There are 2 things that go wrong with it.

The first is that retention gets forgotten. It's deducted from a claim, the reduced payment arrives, life moves on, and nobody keeps a schedule of what's outstanding and when it's due for release. Money that nobody is tracking does not get chased.

The second is that retention is treated as profit. It isn't cash until it's in the account, and pricing a business as though it is means running on money you haven't got.

Keep a single list: job, retention held, release trigger, date due, date chased. Look at it monthly. Where a release is overdue and the client won't move, that's a point to take advice from your own lawyer rather than a page like this. Chasing unpaid invoices in trades covers the internal process for the ordinary cases, before anything escalates.

A fixed price signed before the inputs moved

The other structural drain is a price agreed at a moment that no longer exists.

A fixed-price contract locks your revenue and leaves your costs floating. Between quote and completion, material prices move, subcontractor rates move, and labour availability moves. On a 3-month job the exposure is small. On a job that's quoted in March and finishes in November, it can eat the entire margin, and the longer the job runs the more of the risk you've absorbed for nothing.

The practical responses aren't complicated.

• Date every quote and give it a real expiry. A quote with no expiry is an open offer against a moving cost base.
• Get supplier pricing held in writing for the same window. Where a supplier won't hold it, that's information about the risk you're taking.
• Price the risk you can't remove. A long-duration job carries more cost uncertainty than a short one, and the price should say so.
• Handle variations properly. Approved in writing before the work happens, priced separately, claimed in the next claim. Unapproved variations are the single most common way margin leaves a construction job.

None of that requires renegotiating anything already signed. It changes what the next quote looks like.

Wages don't wait for the claim cycle

Payroll is the deadline that turns a timing gap into a crisis, because it's the 1 payment that can't be moved.

Suppliers can be asked for another fortnight. Your own drawings can be skipped, and often are. A crew's pay can't be, and shouldn't be. So the whole timing mismatch lands on a fixed weekly or fortnightly date, and the more people on the books the harder that date hits.

That's the real reason a builder with 6 staff and a full book feels less secure than a solo operator with 3 jobs. More capacity means more cash committed ahead of payment. It's also why the businesses that survive the step up are the ones that tightened deposits and claims before they added people, not after. The SA construction survival figures show how that step tends to go.

The 4 numbers that show it 6 weeks early

You don't need a finance department. You need 4 numbers, updated weekly, on 1 page.

1. Cash on hand, plus what's committed. The balance is meaningless without the supplier payments and payroll already locked in against it.
2. Work in progress not yet claimed. Every dollar of completed work sitting unclaimed is money you've already spent and haven't asked for.
3. Claimed and unpaid, by age. Split it into under 30 days, 30 to 60, and over 60. The over-60 column is the one that predicts trouble.
4. Retention held, by release date. Your money, held elsewhere, with a date attached.

Those 4 take about 20 minutes a week once the habit exists, and they turn a surprise into a 6-week warning. Pair them with real job costing so you know whether the margin was there at all: job costing versus quoting for tradies covers the difference between what you priced and what the job actually cost.

What to fix first

If the account is tight now, the order that tends to work is deposits, then claim discipline, then variations, then pricing.

Deposits change today's cash. Claim discipline changes the next 30 days. Variations change the margin on jobs already running. Pricing changes everything after the next quote goes out, which is slower but permanent.

What doesn't work is chasing more sales. More work funded on the same terms deepens the hole, faster. That's the whole trap: the order book grows, the account empties, and the growth is what did it. If you want the sector-specific version of all of this, the building and construction coaching page sets out the problems an Adelaide builder usually brings to a first conversation.