More trade businesses fail from cash flow problems than from lack of work. Invoicing terms, deposits, staged payments, chasing debt, and tax planning — the practical cash flow guide for UK electricians.
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Written and reviewed by Andrew Moore, founder of Elec-Mate, against BS 7671:2018+A4:2026, IET Guidance Note 3 and the IET On-Site Guide.
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Cash flow is the movement of money in and out of your business. Money comes in when customers pay you. Money goes out for materials, van costs, fuel, insurance, tools, and your own wages. If more money goes out than comes in during any given month, you have a cash flow problem — even if your business is technically profitable over the year.
This is the most common way trade businesses fail. The electrician is busy, the work is profitable, but they run out of cash because they are paying for materials and fuel today while waiting 30 to 60 days for customers to pay their invoices.
Managing cash flow is not complicated, but it requires discipline: invoice immediately, take deposits, use staged payments, chase debt aggressively, and save for tax. This guide covers each of these in detail.
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The speed at which you get paid starts with the speed at which you invoice. Every day between completing a job and sending the invoice is a day of free credit.
Invoice on the day of completion. Use an invoicing app on your phone so you can invoice from site. Include your bank details, a clear description of the work, and your payment terms. The easier you make it to pay, the faster you get paid.
Taking a deposit is standard practice and protects both you and the customer. It covers your material costs and confirms the booking.
Legal note: Under consumer protection law, a deposit should be reasonable and proportionate. 25% to 40% is widely accepted as reasonable for trade work where you need to purchase materials. Do not take more than 50% as a deposit — this could be challenged as unfair. Deposits should be clearly stated as non-refundable if the customer cancels after materials have been ordered.
For any job lasting more than a week or costing more than £2,000, use staged payments. This keeps your cash flow positive throughout the project instead of waiting until completion.
State the staging schedule clearly in your quote. This is not unusual — customers expect it on larger jobs. It also protects you if the customer has financial problems mid-project: you are never more than one stage ahead of payments received.
Send a polite email or text: "Just a quick reminder that invoice #123 for £X was due on [date]. Would you be able to arrange payment this week?" Most late payments are resolved at this stage — the customer simply forgot.
Call the customer directly. A phone call is harder to ignore than an email. Be firm but professional: confirm the amount, ask when you can expect payment, and note what was agreed.
Send a formal letter stating the amount, original due date, that statutory interest is now accruing (8% + Bank of England base rate = 12.5% in 2026), and that you will take further action if payment is not received within 7 days.
A Letter Before Action (LBA) gives the debtor 14 days to pay before you issue court proceedings. This letter must be sent before you can use the Small Claims Court. Use Money Claim Online (HMCTS) for debts up to £10,000 — the court fee is £35 for claims up to £300, £115 for claims up to £5,000. Most debtors pay when they receive an LBA because they know court action is next.
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A cash flow forecast is a month-by-month projection of money in and money out. It shows you in advance when you might run short — so you can take action (chase payments, delay a purchase, push for a deposit) before the crisis arrives.
Update this forecast weekly with actual figures. If you see a negative month approaching, act now — not when the bank account hits zero.
The single biggest cash flow surprise for self-employed electricians is their tax bill. HMRC does not deduct tax from your earnings like an employer does — you receive the full amount and must save the tax portion yourself.
In your first year of self-employment, your January tax bill includes your actual tax for the year PLUS a "payment on account" (50% advance payment for the next year). This means your first bill is approximately 150% of your normal annual tax.
The solution is simple: set aside 25% to 30% of every payment you receive into a separate savings account from day one. By the time your tax bill arrives, the money is already there. This is non-negotiable discipline for self-employed survival.
Cash flow management is not glamorous, but it is the difference between a business that thrives and one that is always scraping by. Invoice immediately, take deposits, use staged payments, chase debt promptly, and save for tax. These five habits will keep your business solvent.
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