Can't Pay Suppliers? A 7-Day Cash Plan for Construction Businesses
The short answer
Today: list every pound coming in and going out for the next 4 weeks. Pay wages first, call HMRC before any tax deadline you'll miss, and ring your key suppliers before they ring you. Then collect everything you're owed this week.
- Make the list before you make any call. Bank balance, money owed to you, bills due in the next 4 weeks.
- Wages first, then call HMRC and the merchant before the deadline. Underpaying staff on payday counts in law as a deduction from wages. A dated plan with a part-payment keeps the merchant account alive.
- Collect before you cut. Applications, variations, retentions and overdue invoices are often bigger than the gap.
- If the gap never closes, it isn't a squeeze. Debts you can't pay as they fall due are an insolvency warning sign. Get a licensed insolvency practitioner's advice early.
Full order book, empty bank account. The merchant is ringing, payday is Friday and the next stage payment isn't due for two weeks. Your construction business can't pay suppliers or wages on time.
This is the most common cash problem in construction: costs are today, payments are late. It can be fixed, but only in the right order. Here is the 7-day plan.
This is general information from a contractor's experience, not legal or financial advice. For your situation, speak to an accountant or a licensed insolvency practitioner. To go through your cash with us, book a free strategy call.
The next 24 hours
Don't call anyone yet. First make one list on one page. It takes about an hour.
- Cash today: what is in the bank, minus VAT, CIS and tax you already owe.
- Coming in: every invoice, application and retention due to you in the next 4 weeks, with the date you realistically expect it.
- Going out: wages, subcontractors, suppliers, HMRC, rent, finance, week by week.
- The gap: the week it goes negative and by how much.
Now you know the size of the problem. A £6,000 gap for 10 days is a phone call. A gap that grows every week is a different conversation (see the last section).
Paying whoever shouts loudest. The merchant who rings five times is rarely the bill that sinks you. Pay in the order below.
Can't pay suppliers? Who to pay first
This is our order of priority, not a legal one. It protects the things that stop the business if they go.
| Priority | Who | Why |
|---|---|---|
| 1 | Your staff's wages | Paying less than they're owed on payday counts in law as a deduction from wages. And a crew that walks stops every job |
| 2 | HMRC (PAYE, CIS, VAT) | Call before the deadline. On VAT, agreed time to pay can mean lower or no penalties. Silence leads to collection action |
| 3 | Critical subcontractors and suppliers on live jobs | No materials or no sub means no stage completed and no next payment |
| 4 | Secured finance (van, plant) | You need the kit to finish the work |
| 5 | Everything else | Agree dates in writing. Don't ignore anyone |
If you can't pay wages in full, tell your staff before payday. Pay what you can, and give a date in writing for the rest. Take advice (Acas is free) before you change anyone's pay.
Problems like this usually trace back to cash and contracts. Take the free 4-minute Construction Business Scorecard: 18 questions on your pipeline, sales, pricing, cash flow and systems, with your weakest area shown first. Want someone to run valuations, variations and final accounts for you? See our commercial management service.
Day 1–2: the calls
Ring before they ring you. Every creditor wants the same three things: the truth, a date and some money now.
The merchant or supplier. Ask for the credit controller by name and keep it short:
"I'm calling before the due date because I can't clear the full £8,400 on the 30th. A client payment of £14,000 is due on the 12th. I can pay £2,000 today and the balance on the 14th. Can we keep the account open on that basis? I'll confirm it by email now."
Then send the email straight away. Keep the promise. If the 12th slips, call on the 11th, not the 15th.
HMRC. If a VAT, PAYE or Corporation Tax payment will be late, contact HMRC as early as you can. Ask for a payment plan (a Time to Pay arrangement). Have ready:
- Your tax reference for the tax you can't pay
- Bank details you can set a Direct Debit on
- Your income and spending, or the company's
- What you can pay now and each month
HMRC will expect you to reduce the debt first where you can, and may ask directors to put in personal money. More on VAT in can't pay the VAT bill.
Short this week and not sure who to call first?
Book a free call and we'll go through your list with you.
Day 2–5: collect what you're owed
Most builders in a squeeze are owed more than the gap. Go through every job today.
- Applications not sent. Send this week's valuation now, not at month end.
- Variations done but not invoiced. Price them, get them signed, add them to the next payment.
- Overdue invoices. Chase within 7 days. On business clients you can add statutory interest (8% above base rate) and £40–£100 compensation per invoice.
- Retentions due. Check every release date and chase in writing (how to get retention released).
- Stage payments due before the next stage. If the stage is finished and unpaid, don't start the next one. Here's how much deposit to take and a schedule you can copy.
Take a construction contract with a business client (not a homeowner in their own home). There, the Construction Act gives you payment notices and the right to suspend work after 7 days' written notice.
Our guide on a client who won't pay the final invoice has the details and a chase timetable. Working as a subcontractor? See main contractor not paying.
Day 5–7: stop the leak
A squeeze always has a cause. Find yours so it doesn't happen next month. To measure how much of your own money each job needs, see how to stop funding jobs out of your own pocket.
| Cause | How you spot it | The fix |
|---|---|---|
| New deposits finishing old jobs | Every new job feels like relief | Track cash per job; each job pays for itself |
| Invoicing after the work | You fund 2–4 weeks of labour and materials per stage | Stage payments due before each stage starts |
| Tax money spent | VAT and CIS bills always feel like a shock | Separate tax account; move the tax share out the day money lands |
| Underpriced jobs | Busy all year, nothing left (find the leak) | Price to a target margin, not markup |
| No reserve | One late payment and you're short | Build 4–8 weeks of overheads in reserve |
I still look at these numbers every week. The business doesn't run on how busy you are. It runs on cash.
Then book 30 minutes every Friday. Check five numbers:
- cash after the tax pot
- money owed to you and how overdue
- what you owe in the next 2 weeks
- margin on live jobs against the quote
- weeks of signed work ahead
Want help setting this up? Book a free strategy call.
The Cash Flow & Margin Blueprint
The 4-week cash forecast, deposits and stage payments, and the 5 numbers to check every Friday.
Get the free guideWhen it's more than a squeeze
Be honest with yourself here. The Insolvency Service lists these as signs a company is failing the cash-flow test:
- Suppliers send reminder letters or threaten recovery action
- Trade accounts are put on stop
- Suppliers insist on payment upfront
- You fall behind with HMRC
If those describe every month, not just this one, the plan above buys time but won't fix it. Once a company is insolvent, directors must put creditors' interests first. Trading on regardless can make you personally liable.
Get advice early from a licensed insolvency practitioner or accountant. Business Debtline gives free advice. Our article on warning signs a construction company is going bust explains the tests and the options in plain English.
Want a second pair of eyes on your numbers before it gets worse?
Book a free strategy call.
Your 7-day checklist
- One-page cash list done: cash, coming in, going out, the gap
- Staff told before payday, with a date in writing
- HMRC called before the deadline you'll miss
- Every key supplier called first, plan confirmed by email
- Applications, variations and retentions chased this week
