Cash flow headaches are something almost every builder or tradie has experienced. You’re busy on site, projects are moving, and clients seem happy. But when you check the bank account… “Where has all the cash gone?”.
Unpaid invoices and rising material costs are common culprits, but two other issues can quietly affect your cash flow when overlooked or mismanaged:
→ Work in Progress (WIP) and;
→ Income in Advance.
If these are not managed properly, they can leave even profitable construction businesses under financial pressure.
What WIP and Income in Advance Really Mean
Every builder deals with Work in Progress (WIP) and Income in Advance, but the way they’re handled can make a big difference to cash flow.
Work in Progress is the value of work you’ve already done on site but haven’t invoiced yet. The hours are in and the subbies are paid, but until that claim goes out, it’s money you’ve earned but can’t touch.
Income in Advance is the opposite. It’s when you’ve been paid upfront, but the job isn’t finished. The cash looks good in the account, but it isn’t really yours yet because the work is still to be delivered.
On paper, both are normal parts of running a construction business. The problem comes when they aren’t tracked properly.
WIP can make you feel like you’re running behind when you’re not, and Income in Advance can make things look healthier than they really are.
Either way, it distorts the numbers and leaves you scrambling to cover costs later.
WIP = The Cash Drain You Can’t See
Let’s say you’re three months into a job. The materials are paid for, the subbies have been sorted, and the site’s ticking along.
But the invoice hasn’t gone out yet because you’re waiting for a stage to wrap up. The job finishes right before a long weekend, invoicing gets pushed back, and before you know it, the new month has started and the payment cycle resets.
By the time the money lands, four months might have passed since you first stepped on site. Everyone else has been paid, except you.
That gap is what leaves so many builders feeling busy but broke. The work is there, but without steady progress claims, the cash flow will always trail behind.
Income in Advance Looks Good on Paper, But it’s Risky.
Deposits and upfront payments are essential in construction as they protect you from non-paying clients and give you working capital.
The danger arises when that cash is spent elsewhere, such as covering another project, buying new tools, or plugging shortfalls.
If you’ve only completed half the job but already used 80 to 90% of the deposit, you still need to fund the remaining work. That can leave you scrambling to finish with little cash left to do it properly. What started as a safety net can quickly become a liability.
How Builders Can Get Control
WIP and Income in Advance can be adequately managed with discipline and the right systems. A few practical steps make a big difference:
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- Budget every project properly.
Don’t rely on gut feel. Break down costs and timelines before quoting so you know exactly what cash will be needed.
- Track the numbers in real time.
Compare progress claims to actual site costs. This helps you spot when you’ve delivered more work than you’ve invoiced for. - Invoicing should be routine.
Set progress claims as part of your workflow. The sooner you invoice, the sooner the cash comes in. - Use accurate financial reporting
If your numbers are weeks behind or buried in spreadsheets, you’re making decisions blind. Cloud-based tools can give you clarity and confidence.
- Budget every project properly.
Why It Matters for Your Construction Business
Builders often focus on the next quote, site, or client. But WIP and Income in Advance are two areas that can quietly make or break profitability. If ignored, you may reach the end of a project only to realise the cash to finish it has already disappeared.
That’s why working with a construction accountant or construction business advisor can be game-changing. They can set up systems to track these numbers, forecast cash flow accurately, and help you understand where the money really is.
Get Clearer Numbers with Growth iQ
At Growth iQ, we work with builders and construction businesses to simplify financial tracking and keep cash flow predictable. Our team of specialist construction accountants and advisors can help you manage WIP, structure progress claims, and plan for both growth and stability.
If you want to stop wondering where the money has gone and get a clear picture of your cash flow, book a free discovery call with our team for practical advice that helps you run your business with more confidence.