The Importance of Cashflow on a Construction Project

Cashflow: The Lifeline of Any Successful Build

When it comes to construction, people often focus on the big-ticket items: the drawings, the schedule, the quote. But behind every successful project, there’s one critical element that keeps everything moving cashflow.

Cashflow is the lifeblood of a construction site. Without it, even the best-planned projects can grind to a halt. In this blog, we’ll explain why cashflow management is vital, what can happen if the money stops, and how to safeguard your project from cash-related risks.

I speak with experience here, my job is to manage finances on all our construction projects and I can tell you, even the best clients can get it wrong from time to time. Mistakes happen, what I have learned is, its not about the mistake, its how the mistake is handled that counts the most. Lets get into it

 

Why Cashflow Matters So Much in Construction

Construction is a pay-as-you-go industry. Materials, labour, equipment hire, scaffolding, insurances, site welfare — they all have to be paid for before the final building is completed and handed over.

Good cashflow ensures:
✔ Materials arrive on time
✔ Tradespeople are paid on schedule
✔ Site setup and running costs are covered
✔ Unexpected variations and issues can be absorbed without delay
✔ Confidence remains high between all parties (builders, suppliers, clients)

Without steady cashflow, even a small project can stall, costing everyone more time and money.

 

The Common Cashflow Challenges in Construction

Here are the most common reasons cashflow becomes a problem:

• Delayed client payments (common on self-managed builds or poorly structured contracts)

• Underpricing the job at tender stage

• Unexpected variations not properly accounted for

• Retention payments held too long (particularly on larger developments)

• Slow supply chain payments meaning contractors struggle to buy materials or pay wages

In construction, most contractors finance the build as it progresses. If the incoming cash dries up, they can’t finance the next stage and everything stops.

 

What Happens When Cashflow Stops Mid-Project?

The consequences of cashflow problems are serious and can escalate quickly:

1. Immediate Site Slowdown or Shutdown

If suppliers aren’t paid, materials won’t arrive. If trades aren’t paid, they’ll leave the site. Work slows, deadlines slip, and costs rise.

2. Supply Chain Fallout

Reputation spreads fast. If a builder or developer can’t pay suppliers, word gets out and it becomes harder to get credit terms or trades on-site.

3. Legal Action and Contract Disputes

If contractors aren’t paid, they may lodge claims, seek adjudication, or even place liens on the property. A stalled site can become legally tangled very quickly. This may be passed on depending on the T&C

4. Rising Costs and Damage to Profitability

Every day a project runs late costs money: additional prelims (site toilets, fencing, scaffolding hire), interest on loans, liquidated damages clauses, and loss of future income.

5. Loss of Investor and Lender Confidence

If you’re borrowing money or working with investors, a stalled project damages credibility. It becomes much harder to raise funds for future phases or developments.

 

How to Protect Cashflow During a Project

At Create, we have strict processes to ensure cashflow remains healthy for everyone involved. Here’s how you can safeguard yours too:

1. Clear Payment Schedules Linked to Milestones

Payments should be based on work completed, not on fixed dates. This keeps everything fair and ensures the builder has funds to keep progressing.

2. Proper Project Cost Planning

Budget realistically from the start. Allow contingency for:

• Variations

• Lead time issues

• Unexpected site problems e.g., ground conditions or weather, this can be huge if you are on sub-structure such as footings / groundworks etc

3. Open Communication

Clients, builders, and trades must all understand the payment plan and cash requirements before breaking ground. Transparency prevents disputes later.

4. Monitor and Forecast Regularly

Cashflow should be reviewed weekly during a live build, not just at month-end. Spotting shortfalls early means corrective action can be taken.

5. Manage Variations Promptly

If the scope changes (which it often does), agree variation costs quickly and update the payment structure not months later.

 

Why We Focus on Cashflow at Create Builders

At Create, we know that predictable cashflow = predictable projects. We:

• Set clear milestones

• Provide detailed payment structures

• Communicate early and often

• Never let small issues become big problems

We believe in partnering with our clients, not hiding behind small print. When cashflow is healthy, everyone wins: faster builds, better workmanship, and stronger relationships.

 

Final Thoughts: Cashflow is King in Construction

If you’re planning a project, remember this: a great design and a great builder mean nothing if the money doesn’t flow properly.

Take the time to plan your cashflow, structure your payments carefully, and work with a builder who treats your budget with respect. Your project — and your future profits — depend on it.

If you want a builder who values transparency, communication, and financial control, get in touch with us today & Ask how we control each projects finances

 

See our services here

 

Josh Clover
Finance Assistant

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