Cash flow and business structure

A profitable job can still close a business. Profit is a figure on a report and cash is what pays wages on Thursday, and the gap between the two is where trade businesses get caught, most reliably in January after a December spent flat out on the tools with no time left for quoting.

These lessons deal with both ends of that. On the operating side: knowing what is coming in and going out before it arrives rather than after, and holding customer deposits as cash until a week or two before the job starts. Spending a deposit the day it lands converts liquid money into materials sitting in a shed, and materials do not pay staff.

On the ownership side, the question is where the money rests once you have made it. Wealth held inside a trading business carries that business's risk, so a claim or a failure takes the wealth with it. The four Australian structures, sole trader, partnership, company and trust, differ enormously in both liability and tax treatment, and the same investment returning the same amount can be taxed at anywhere from nothing to forty five per cent depending purely on whose name it sits in. That is a decision worth making deliberately rather than inheriting from whatever you set up on day one.