In one line
The money moving in and out of your business, as opposed to the profit you have earned on paper.
Also called working capital in conversation, though the two are not quite the same.
What it means in practice
Cash flow is about timing. A job can be priced well and still leave you short if you buy the materials in week one and get paid in week ten. That gap, not the margin, is what closes most small trade businesses.
The levers are all on the paperwork: take a deposit, bill long jobs in stages, invoice the day the work finishes, keep terms short, and put a payment link on the document.
Example. Materials bought on the 3rd and an invoice paid on the 40th is a 37 day gap you are financing yourself.
Where it shows up on the paperwork
Cash flow is invisible on any single document and is decided by all of them together: when you quote, when you take a deposit, when you invoice, what terms you set, and how quickly you chase.
What goes wrong
- Judging a job by its margin and never by its timing. A 30% margin that arrives ten weeks late can still leave you borrowing.
- Buying materials on your own card and invoicing at the end of the job.
- Offering net 30 to a client who would have paid on receipt, because the invoice template said net 30.
The tools for this
Related terms
- Accounts receivableThe money your clients owe you on invoices you have sent but not yet been paid for.
- Progress billingInvoicing one job in stages as they are completed, rather than in a single invoice at the end.
- DepositPart of the price paid before the work starts, credited against the final balance.
Common questions
Why am I profitable but always short of cash?
Because profit is counted when you invoice and cash arrives when the client pays. If you buy materials in week one and get paid in week ten, you are financing the client for nine weeks out of your own pocket.
What is the fastest way to improve cash flow?
Take a deposit, invoice the day the work finishes, and put a payment link on the document. Those three change nothing about your prices and move most of the money forward.