Getting Through Winter: A Cash Flow Plan for Building Contractors

Every contractor knows the pattern. The days get shorter, the rain sets in, a few days are lost to frost, the whole industry downs tools for Christmas, and then, in the quietest month of the year, the January tax bill lands. None of it is a surprise, yet every year it catches good firms short.

The good news is that winter is the most predictable cash squeeze there is. If you plan for it now, in the autumn, while the work and the money are still flowing, you can get through to spring without the stress. Here's how.

Why winter hits building firms so hard

It isn't one thing, it's several things landing at once:

• Fewer productive days. Shorter daylight, wet weather and frost all slow down or stop external work, so less gets done and less gets invoiced.
• Costs don't hibernate. Wages, van finance, insurance, rent, software and loan repayments carry on regardless of how many days you're on site.
• The Christmas shutdown. You lose a fortnight of invoicing, and your clients' accounts departments often close even earlier. Miss their last payment run in December and that money may not arrive until late January.
• The January tax double-whammy. If you're self-employed or a partner, 31 January is when you pay the balance of last year's Self Assessment bill and your first payment on account for this year. For a lot of contractors that's the biggest single payment of the year, due in the leanest month.

Your winter cash plan in six steps

1. Build a winter forecast nowMap out October to February month by month, or better still week by week. Be realistic: pencil in lost weather days, the shutdown, and clients paying later than usual. Here's how to build a rolling cash flow forecast →
2. Know your January tax bill in OctoberAsk your accountant for an estimate of what's due on 31 January, then set money aside each month between now and then so it's sitting there waiting. If your profits have genuinely dropped this year, you may be able to reduce your payments on account, but get advice first, as HMRC charges interest if you cut them too far. See our simple system for setting aside for tax →
3. Get paid before the shutdownAsk each main client now when their last payment run before Christmas is, and get your applications and invoices in well before it. Chase overdue money in November, not the week before Christmas when nobody's answering. And check whether any retentions are due for release. Our credit control guide for contractors →
4. Line up winter-proof workInternal work keeps the team busy when the weather won't: refurbishments, fit-outs, kitchens and bathrooms, maintenance and repair contracts. Price it properly, too. Winter jobs carry extra costs for heating, lighting, drying out and slower progress, and they need to be in the price. How to price jobs to actually make money →
5. Trim and time your outgoingsPut off non-essential spending, like a new van or plant purchase, until the cash picture is clear. Time big material orders for stronger weeks, and talk to key suppliers about terms before you need them. Winter is also when the flexibility of subcontract labour shows its value. Employ or subcontract? The cost comparison →
6. Arrange your safety net while you're strongBanks lend to businesses that don't need the money. If you might want an overdraft or invoice finance facility, arrange it in October off the back of a busy summer, not in January with a red balance. And if a tax bill genuinely can't be paid in full, contact HMRC before the deadline to ask about a Time to Pay arrangement. Ignoring it only adds penalties and interest.

Use the quiet weeks well

A slower winter isn't all bad news. It's the one time of year you've got space to work on the business rather than in it. Get the books fully up to date, look back at which jobs made money this year and which didn't, review your pricing for next season, and get ahead of your year-end paperwork. The firms that use January for planning are the ones that start spring with a full diary and healthy margins. How to know which jobs are actually making you money →

Plan in autumn, relax at Christmas

Winter is the same every year, which means it's one of the few cash problems you can solve completely in advance. A realistic forecast, a tax pot, money collected before the shutdown and a safety net arranged early are all it takes to turn the leanest months of the year into a non-event. Start now, while there are still four months of runway, and you'll actually get to enjoy the break.

This article is general guidance for building contractors, not advice for your specific situation. Always review your own circumstances with your accountant before acting.