An Opportunity to De-Risk and Stabilise Cash

Introduction - De-Risk and Stabilise Cash

One of the biggest cashflow mistakes growing construction and engineering businesses make is this:

They fund the job before the customer funds them.

Materials are ordered. Engineers are allocated.Subcontractors are booked.

And only afterwards does the invoice get raised.

For small and mid-sized contractors, this is dangerous.

At Jones Financial Accounts (JFA), we advise SMEs across construction, maintenance, and engineering services.

And one of the biggest overlooked growth opportunities is using pro-forma invoices properly.

Pro-forma invoicing is not about being difficult with customers.

It is about financial discipline.

Done correctly, it allows contractors to:

• de-risk large repair jobs

• stabilise cashflow

• avoid VAT shocks

• protect working capital

• scale without overdraft stress

This blog explains pro-forma invoicing in plain English, why it matters for SMEs, and how to use it as a strategic tool.

What Is a Pro-Forma Invoice (In Plain English)?

A pro-forma invoice is simply:

An invoice issued before work is fully completed, asking for payment upfront or in advance.

It is commonly used for:

• high-value repairs

• large material orders

• specialist engineering work

• jobs with significant upfront cost

Think of it as:

“We need payment confirmation before we proceed.”

It is not a final tax invoice yet, it is a cash protection step.

Why Pro-Forma Invoicing Matters for Small Contractors

Many SMEs assume upfront billing is only for big companies.

But small businesses need it more.

If you are turning over £500k–£5m, your biggest constraint is usually:

working capital

You do not have unlimited cash to fund:

• £20k materials

• subcontract labour

• equipment hire

• VAT obligations

  
  

The Financial Threat: Contractors Become the Bank

Without pro-forma discipline, contractors effectively become lenders.

You are paying for:

• parts

• labour

• overhead

• VAT

…while waiting 30–60+ days for payment.

That creates serious strain.

Related blog:https://www.jonesfa.co.uk/blog/invoicing-gap-construction

And in extreme cases, businesses collapse not because of lack of work…

…but because of cashflow timing.

Done Right ✅	Done Wrong ❌
Pro-forma used for high-cost jobs	Contractor funds materials personally
Customer commits financially upfront	Customer delays payment after completion
Cashflow remains stable	Business relies on overdraft
Risk reduced before work starts	Risk discovered after costs are incurred
Growth is funded safely	Growth creates financial stress

Common Mistakes Contractors Make With Pro-Forma Billing

Mistake 1: Only Invoicing After Completion

This is too late for jobs requiring upfront spend.

Mistake 2: Absorbing Material Costs “To Keep the Customer Happy”

This often leads to:

• cashflow pressure

• delayed supplier payments

• reduced margin

Mistake 3: Confusing Pro-Forma and Final Invoice

Pro-forma must be tracked properly so:

• receipts are allocated

• VAT rules are correct

• final invoicing is clean

Mistake 4: No Clear Policy

Many SMEs use pro-forma inconsistently, which creates customer confusion.

Mistake 5: Weak Job System Controls

If JobLogic or CRM isn’t updated, pro-forma billing becomes messy.

Practical Steps to Use Pro-Forma as a Cashflow Strategy

Here is the CFO-grade approach for construction SMEs:

Step 1: Define When Pro-Forma Applies

For example:

• any job with materials over £2,000

• any repair above £10,000

• any specialist subcontract work upfront

This removes emotion and inconsistency.

Step 2: Communicate Early

Customers should know before work starts:

“This job requires upfront payment because of material cost.”

Professional framing reduces pushback.

Step 3: Link Payment to Scheduling

No payment = no booking.

This protects engineer time and resource planning.

Step 4: Track Pro-Forma Receipts Properly

Ensure payments are logged clearly so final invoicing is accurate.

Step 5: Use Pro-Forma to Strengthen Margin Control

Pro-forma reduces the temptation to discount under pressure.l

The Opportunity: Pro-Forma Unlocks Growth Without Stress

Contractors who adopt pro-forma policies gain:

✅ stronger cash reserves

✅ reduced borrowing

✅ better supplier relationships

✅ smoother project delivery

✅ confidence to take on larger jobs

A business doing £200k/month turnover that reduces upfront funding by even £30k per month creates:

£360k of annual working capital relief.

That is transformational.

Key Takeaways

• Pro-forma invoicing stops contractors funding high-value repairs themselves

• SMEs benefit most because working capital is limited

• Clear rules and communication reduce customer friction

• Used properly, pro-forma stabilises cashflow and supports growth

If your construction or engineering business is taking on larger repairs and cashflow feels stretched, JFA can help you build pro-forma policies, invoicing controls, and working capital stability.

Download our free cashflow tools here:https://www.jonesfa.co.uk/resources

Wrapping up today's insights, tomorrow we simplify another accounting challenge.