How you can protect your Trade or Subcontracting business from missed progress payments

When your business is beholden to progress payments from the client or head contractor, business can get challenging when a payment is missed. You are most likely in the position of relying on a few large payments each month as opposed to several smaller ones, so when one of those payment doesn’t turn up, it could mean missed wages, you being unable to purchase materials, or worse yet, having to stop work entirely because you don’t have enough cash to continue on.

So, how can you protect yourself against missed progress payments? The answer is both simple and complex, keep enough cash in the bank to cover expenses, ideally 2 months worth of expenses.

In business, cash is like oxygen, if you don’t have enough, your business can die quickly. What most small businesses don’t realise though, is that you can “grow broke”. There might be plenty of work on, but growing to accommodate demand costs money. More staff, more materials, more advertising, more admin….. If you over extend your business and outlay most of your cash on growth, a missed progress payment can be very risky.

So, how do you mitigate the threat of a missed progress payment?

Before you get into trouble

Put aside 50% of net profit until you have 2 months of business expenses in the bank, in reserve.

If you truly want to protect your business against missed progress payments, or any other cash-related event, keep enough money in the bank to ride out the storm. Sit down with your accountant and come up with a plan to get this money put aside. You may be able to achieve it with an overdraft facility, which is fine. If you can’t though, getting the cash in the bank is the next best thing. Your accountant can help you figure out the best place to park this money, and make sure its still available to you if problems arise.

When you get into trouble

Negotiate with your creditors. When you are short on cash, the default is to make sure wages are paid so you can continue to work, and maybe make sure key suppliers are paid, but to ignore the rest until you have the cash to deal with them. This is absolutely the wrong approach!

Be transparent with your creditors. Let them know the situation and that you will pay them when you are able. Some of them may even be open to negotiating a reduced fee for a couple of months instead of losing your business in the long-term. One sure fire way to make your creditors uncomfortable is to stop communicating with them. When they have no communication they assume the worst, and you may find yourself with a court appointment that could have easily been avoided with a phone call.


Missed progress payments can be devastating if you are not prepared. To protect yourself:

  • Keep 2 months of expenses cash in the bank
  • If you get into trouble, negotiate and communicate, don’t go quiet.

This article is part of a small series on what you can do to protect your Trade or Subcontracting business from the collapse of a head contractor. You can find the summary article here, and detailed posts on material costs, inclement weather as well.

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