Garage cash flow: profitable yet cash-strapped.

Where the money goes when it’s not in the bank

A garage cash flow issue often involves money tied up in non-loss areas, none of which are actual losses.

• Stock is cash turned into tyres and parts on the shelf.
• Work in progress is where jobs are completed or partially done but not yet invoiced.
• Debtors are amounts invoiced but not yet paid by customers.
• Prepayments include insurance and rates paid upfront for the year.
• Equipment bought outright means cash leaves immediately, with benefits over years.

Identifying which of these holds the money is key, as solutions vary and applying the wrong one achieves nothing.

Stock is what most workshops can free up quickest.

Slow-moving stock is the least productive cash a workshop has, and it’s often the easiest to release.

It builds up because each choice seemed justifiable: a supplier deal, a line requested, a part purchased for a job that didn’t occur. No one intentionally buys dead stock.

Assessing stagnant stock and clearing it turns shelf space into cash when needed. It also prevents the same funds being wasted next quarter on items that do sell.

Invoice as soon as the job is complete.

Work in progress is hidden and costly, growing in garages where invoicing is done in batches.

A job finished on Tuesday and invoiced on Friday gives the customer three unnecessary days, which adds up to real money over a busy month. If they pay on collection, it’s fine; if on terms, the clock starts only when invoiced.

This also applies to incomplete jobs awaiting parts. If the labour is finished and the customer has consented, there’s often no reason not to invoice that part instead of holding everything back.

Terms come at a cost.

Every account customer on thirty or sixty days is being extended working capital, which incurs a cost even if there are no defaults.

That’s acceptable when intentional and priced. It’s risky when it builds up: multiple accounts slipping from thirty to forty-five days can mean a significant amount for a small garage, and it occurs without anyone choosing it.

Monitor the ageing, not just the balance. A steady total with rising average age signals trouble ahead.

Align the timing of your outgoings.

Cash flow pressure in garages is often a timing issue, not 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 visible, much is adjustable: a supplier payment shifted a week, a stock order timed differently, or simply knowing to keep a buffer instead of being caught out by the same week each quarter.

Maintain a buffer outside the overdraft

The final part is unglamorous and it distinguishes a poor month from a crisis.

A garage with a few weeks of fixed costs saved can handle a broken ramp, a late-paying fleet account, or a quiet fortnight without being forced into decisions. Without this, all three become urgent, leading to costly responses: discounting to fill bays, delaying maintenance, or borrowing on short notice.

It's a slow process, but it's the best investment a profitable garage can make with its first surplus, as it turns future issues from emergencies into mere inconveniences.