Garage cash flow: profitable and still short.

Where the money is when it is not in the bank

A garage cash flow problem is usually money sitting in places that are not losses, none of which are losses.

• Stock, which is cash converted into rubber and parts on a shelf.
• Work in progress, where the job is done or half done and not yet invoiced.
• Debtors, where it is invoiced and the customer has not paid yet.
• Prepayments such as insurance and rates, paid in advance for a year.
• Equipment bought outright, where the cash left at once and the benefit arrives over years.

Naming which of those is holding the money is most of the work, because the fix is different for each and applying the wrong one does nothing.

Stock is the one most workshops can release fastest

Slow-moving stock is the least productive cash a workshop holds, and it is usually the easiest to free up.

The reason it accumulates is that each individual decision was defensible: a supplier deal, a line someone might ask for, a part bought for a job that did not happen. Nobody buys dead stock deliberately.

Reviewing what has not moved in a defined period, and clearing it, converts shelf into bank at exactly the moment it is useful. It also stops the same cash being spent again next quarter on the lines that actually sell.

Invoice the moment the job is done

Work in progress is invisible and expensive, and it grows in workshops where invoicing happens in a batch.

A job completed on Tuesday and invoiced on Friday has lent the customer three days for no reason, and across a busy month that lag is real money. Where the customer pays on collection it is not a problem; where they are on terms, the clock only starts when the invoice does.

The same applies to partially completed work waiting on a part. If the labour is done and the customer has agreed, there is often no reason not to invoice that portion rather than carrying all of it.

Terms are a price you are paying

Every account customer on thirty or sixty days is being lent working capital, and that has a cost even when nobody defaults.

That is fine when it is deliberate and priced. It is dangerous when it accumulates: several accounts drifting from thirty to forty-five days is a meaningful sum for a small workshop, and it happens without anyone deciding it.

Watch the ageing rather than the balance. A total that stays flat while the average age climbs is a warning that arrives before the trouble does.

Match the timing of the outgoings

Garage cash flow pressure is often a calendar problem rather than a volume one.

Rent, wages, tax and insurance land on their own dates regardless of when customers pay, and a workshop can be perfectly solvent across a quarter while being short in one week of it. Mapping the actual dates rather than monthly averages usually reveals one predictable pinch point.

Once it is visible, most of it is adjustable: a supplier payment moved a week, a stock order timed differently, or simply knowing to hold a buffer rather than being surprised by the same week every quarter.

Keep a buffer that is not the overdraft

The last piece is unglamorous and it is what separates a bad month from a crisis.

A workshop with a few weeks of fixed costs in reserve can absorb a broken ramp, a late-paying fleet account or a quiet fortnight without decisions being forced on it. Without one, all three become urgent at once and the responses are all expensive: discounting to fill bays, deferring maintenance, or borrowing at short notice.

Building it is slow and it is the highest-return thing a profitable workshop can do with its first surplus, precisely because it converts future problems from emergencies into inconveniences.