Late payment is brutal in construction: over half of invoices to construction firms are paid late, and average delays are over a month. Small firms with thin reserves get hit hardest. The fix isn't magic, it's habits: how you price, how you bill, and how you watch your numbers month to month.
This is practical guidance only and is not financial advice. Always get proper advice from an accountant who understands construction.
1. GET YOUR PAYMENT STRUCTURE WORKING FOR YOU
Your contracts are your first cashflow tool.
Use progress billing, not "pay at the end"
- Waiting until completion means you're funding the whole job – materials, labour, overhead – sometimes for 45–60 days or more.
- Push for stage payments or valuations at least monthly, more often on bigger jobs.
- Front-load where you can: higher % on early stages to cover mobilisation and materials.
Match payment terms to your costs
- If suppliers want 30 days, don't accept 60–90 day terms from clients unless you've got the reserves to bridge it.
- Negotiate realistic terms up front – it's easier than trying to fix them once you're on site.
Keep retention realistic
- Aim for 3–5% max, and push to release half at practical completion and the rest after a sensible defects period.
- Track retentions separately so you know exactly how much cash is parked.
2. RUN A SIMPLE ROLLING CASHFLOW, NOT JUST A BANK BALANCE
You need a forward view, not just "what's left in the account today".
Use a basic cashflow template
- At its simplest: columns = weeks or months; rows = money in and money out.
- For each period, list expected income (payments from jobs) and all outgoings (wages, materials, VAT, rent, finance).
- Net it off to see if you're positive or negative, and keep a running balance.
Update weekly Set aside 30 minutes a week to:
- Slide everything one week/month forward.
- Update what's actually been paid.
- Shift any payments you now know are going to be late.
This is where you spot that in six weeks' time, unless you act, you won't have enough to cover wages or VAT.
Use project-based forecasting
- On project work, map each job's expected payments next to its costs over time.
- Stagger start dates so you don't have three jobs all in the heavy "cash out, nothing in" phase at once.
There are plenty of free UK cashflow templates and spreadsheets you can adapt rather than building from scratch.
3. PROTECT YOUR CASH ON EVERY JOB
Day-to-day behaviours that keep you afloat:
Invoice and apply on time, every time
- Late applications = late payments = you silently carrying their project.
- Put payment/app dates in your calendar and treat them like site start dates.
Chase early, not after 60 days
- Start with a polite reminder just before/after the due date.
- If they slip past a week, switch to firmer wording and, where it's B2B, start referencing statutory interest under the Late Payment Act.
- Don't let "we're just waiting for sign-off" drag on for months.
Use the legal levers you've got
- Construction Act – interim payments, payment notices, smash-and-grab, suspension.
- Late Payment Act – interest and fixed charges for late commercial payers.
- The aim is cash in the door, not being everyone's overdraft.
Control overhead and spend
- Fixed costs (yard, vans, insurance, software) are what sink you when work slows.
- Keep a close eye on anything that isn't directly earning – if quieter months are coming, trim early rather than burning cash hoping it'll turn.
4. BUILD A SMALL BUFFER SO ONE BAD JOB DOESN'T KILL YOU
Most small firms go under because one or two jobs hit late and there's no buffer.
Aim for 3–6 months of fixed costs as a reserve
- That's rent, basic wages, finance, insurance – not full turnover.
- Start small: skim a fixed % of profit off each job into a separate "rainy day" account and don't touch it.
Keep the reserve separate
- Different account, ideally not linked to your main card. If it's sat in the current account, you'll spend it.
Use your runway to make better decisions
- When you've got a few months' cover, you're less likely to grab every terrible job at terrible terms "just to keep the lads busy".
- That alone improves your cashflow and sanity.
5. CHOOSING JOBS WITH CASHFLOW IN MIND
Last bit that rarely gets said out loud: some jobs are good for cashflow and some are poison.
Favour jobs with:
- Shorter programmes and quicker payments.
- Decent deposits or early stage payments.
- Low retention and clear release triggers.
Be wary of:
- Long, thin-margin jobs with long payment terms and heavy retentions.
- Clients with a rep for late pay.
- Main contractors who argue every valuation – your legal rights help, but they still hammer your time and headspace.
Having a simple 3–6-month cashflow forecast lets you see whether a "big opportunity" will actually starve you between now and the first payment.
DOWNLOAD THE CASHFLOW TEMPLATES
Two versions available, pick the one that fits how you work:
- 12-week (weekly) · tighter control, see exactly which week the crunch hits.
- 6-month (monthly) · wider view, better for planning bigger jobs and quarterly tax payments.
Open in Excel, Google Sheets, or any spreadsheet app. Fill in your own numbers.
How to use the template
- Set your time frame · label columns with real dates (e.g. "Week 1 w/c 1 Apr").
- Enter your starting cash · what's actually in the business account today. Each next period auto-fills from the previous closing balance.
- Map what's coming in, job by job: put expected receipts in the week/month you realistically think they'll land (not when you hope).
- Map what's going out, when it actually leaves the bank · project costs and overheads, by the date you expect to pay, not the invoice date.
- Watch the closing balance line: anywhere it drops below zero or your comfort buffer, you've got a problem to fix now.
- Update once a week · shift late payments, add new jobs, adjust costs. 30 minutes that could save your business.
You're not aiming for perfection – just a real-world forward view instead of flying blind.
This page is guidance only and does not constitute financial or legal advice. Using it does not make us your adviser. Always get advice from a qualified accountant or financial professional who understands construction.
What to do next
- Set up a simple rolling cashflow forecast (weekly or monthly) and commit to updating it every week · 30 minutes that could save your business.
- Put every application and invoice date in your calendar and treat them like site start dates · late applications mean late payments.
- Start skimming a fixed percentage off each job into a separate "rainy day" account · aim for 3 to 6 months of fixed costs as a reserve.
- Review your current jobs: are any starving your cashflow with long payment terms, heavy retentions, or late valuations? Use the legal levers in this section to chase what's owed.
- Before taking on a new job, run the numbers through your cashflow forecast to check you can bridge the gap between costs and first payment.
Sources
- Housing Grants, Construction and Regeneration Act 1996 · interim payment rights, suspension for non-payment
- Late Payment of Commercial Debts (Interest) Act 1998 · statutory interest and fixed charges on late business payments
- Small Business Commissioner guidance on late payment · government support for late payment issues
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