Cash flow for CCTV installers: how to stop funding your customers' projects

Profit and cash aren't the same thing, and installation companies learn this the hard way. You can win a large, profitable project and still struggle to pay wages next month, because the equipment had to be bought in full while the customer pays in stages, or late. In this trade, growth itself can create a cash crisis.

The good news is that cash flow responds well to a few simple habits. This guide covers how to collect faster, spend smarter and see trouble coming before it arrives.

Why installers run short of cash

Almost every installation follows the same pattern:

1. You spend time on surveys and quotes, before any money comes in.
2. You buy equipment, usually before you've been fully paid.
3. You pay technicians during the job.
4. You finish, then invoice.
5. The customer pays days, weeks or months later.
6. The customer holds back the final amount until a small snag is fixed.

Larger customers tend to make this worse, with longer payment terms and retention. Without care, you end up financing them with your own money.

Ask for an advance

The most effective change is also the simplest: collect a meaningful advance when the order is placed. Many installers ask for an amount that at least covers the main equipment.

A common structure looks like this:

The exact percentages depend on your market, and on customer size. A small shop may pay in two stages, while a corporate customer may insist on its own terms. For those, try to negotiate a material advance or deliver the materials against an invoice.

Make it normal

Owners sometimes feel awkward asking for money up front. State it plainly in the quote, as a standard term: "An advance of X% confirms the order and secures your installation date." Most customers accept reasonable terms that are clearly stated. A customer who refuses to pay any advance on a sizeable job is telling you something about the risk.

Don't order equipment until the advance has been received. Once you've bought a customer-specific item, you bear all the risk. A proforma invoice gives customers a proper document for this payment.

Invoice on time, every time

Many companies are slow to bill and then complain about being paid late. An invoice that goes out two weeks after the job has effectively extended your payment terms by two weeks.

• Invoice on the day each stage is complete.
• Have the signed handover ready to attach.
• Check the details: correct legal name, tax number and purchase order number. Some companies reject invoices that lack them, and you only find this out a month later.
• Find out who approves payment, and how invoices need to be submitted.
• Make it easy to pay, with bank details on the invoice and where available, a scan-to-pay code.

Tie completion to something objective. "Completion" must not be left to whenever the customer feels like it. Your signed handover note does this job, and any snags should be listed with dates so they don't hold up the whole payment.

Follow up systematically

Overdue invoices rarely fix themselves. Set a process, and let someone own it.

Keep the tone polite and specific. "Could you let me know when invoice 2051 will be paid?" works better than an angry message. Note each promise, and call again on the day after a promised date passes.

Recording payments against invoices as soon as they arrive tells you at a glance who's overdue, without having to compile a list.

Use your leverage carefully

Your strongest moment comes before the job ends, so be careful about giving everything up at the start. Service visits on overdue accounts can also be a good time to ask. Take care with any steps like pausing service, and don't disable a customer's system over a dispute. It may be illegal, and it could damage your reputation. Check your contract, and ask for legal advice in serious cases.

Check credit before you take risks

A large order from an unknown company is both exciting and risky. Before extending credit:

• Look up the company's registration and basic information.
• Ask others in the trade about their payment habits.
• Ask for a purchase order and a named contact in accounts.
• Start with a small amount of credit, and increase it as they pay reliably.
• Check how much of your total owed money is with one customer. A single late payer shouldn't be able to sink you.

Be especially careful with subcontracting. If a main contractor only pays you when they've been paid, you're also taking on their customer's risk.

Manage what you spend

Collecting faster is one half of the job. Spending smarter is the other half.

Supplier terms

Ask your distributors for credit terms once you've built a record with them. Paying a supplier in 30 days, while collecting an advance now, changes your position completely. Always pay on the agreed date, as your reputation with distributors is valuable.

Stock

Cash on a shelf isn't working for you. Hold only what you need, and order project equipment close to the start date. See our inventory guide for more.

Fixed costs

Rent, vehicles and salaries must be paid whether or not jobs are coming in. Before taking on any new fixed cost, consider how you'd pay for it in a quiet month. Our guide to job costing shows how much work you need to cover overheads.

Tax money

Tax collected isn't yours. Keep GST, VAT, sales tax and payroll taxes separate, so that you aren't caught out at filing time. A separate bank account is a simple way to do that.

Build a simple cash forecast

A forecast lets you see a shortage weeks ahead, while you can still do something about it. Keep a basic 13-week view in a spreadsheet.

(The figures here are invented.)

Enter only money you truly expect, and be realistic about when it'll arrive. Use each customer's actual payment history rather than their stated terms. In this example, the forecast shows a problem in week 3. Knowing it now lets you chase an invoice, delay a purchase or arrange finance, rather than discovering it on payday.

Update it weekly. It takes about 15 minutes once it's set up, and it may be the most valuable 15 minutes of your week.

Before taking a big job

Large projects can sink companies that aren't ready for them. Before you accept one, map out its cash flow month by month.

• When do you pay for equipment?
• How much labour and subcontracting do you pay before the first receipt?
• What payment terms apply, including retention?
• What about bank guarantees or deposits?
• What's the peak amount of cash you'll need?
• Where will this money come from?

If you can't fund the peak, try renegotiating the terms, asking the distributor for project credit, or arranging finance before you sign. Our tender guide covers more on this. Sometimes walking away is the right choice, however hard that may feel.

Financing options

Borrowing can smooth out timing issues, but it won't fix an unprofitable business.

• Overdraft or working capital line: Flexible, and it's best arranged before you need it.
• Invoice financing: A lender advances money against your invoices, at a cost.
• Equipment or vehicle finance: Spreads the cost of larger items.
• Project-specific supplier credit: Often a cheap option if your record is good.

Compare the true cost with your margin. Expensive borrowing on a thin-margin job can turn a profit into a loss. Talk to your accountant first.

Recurring income helps

Maintenance contracts, paid annually or quarterly in advance, bring in steady money regardless of the project cycle. They're one of the best ways to smooth out cash flow over time.

Warning signs to act on

• You're regularly paying suppliers late
• You use one customer's advance to pay for another's job
• Your owner's salary is the first thing to be skipped
• Overdue invoices keep growing
• You don't know how much cash you'll have next month
• Tax payments are coming as a surprise

If several of these apply to you, get help from your accountant now. These problems are much easier to fix early on.

Five things to do this week

1. List everything owed to you by age, then call the oldest three.
2. Add an advance and clear stage payments to your standard quote terms.
3. Invoice anything finished but not yet billed.
4. Draw up a 13-week cash forecast.
5. Ask your main distributor about better terms.

Good cash discipline doesn't mean being hard on customers. Clear terms, prompt invoices and polite follow-up are simply what professional companies do, and most customers respect them.