If you run a garage or MOT centre, you already know this feeling:
The diary is full.
The ramps are busy.
The phone never stops ringing.
Staff are flat out.
Yet somehow… the bank balance still feels tight.
VAT is looming.
Corporation Tax is approaching.
And January seems to arrive faster every year.
You check your accounts and think:
“How can we be profitable but still short on cash?”
This is one of the most common frustrations we hear from garage and MOT centre directors, particularly those running limited companies.
It doesn’t mean you’re doing something wrong.
It means profit and cash are not the same thing — and garages sit squarely in the zone where that difference really matters.
Profit vs Cash: The Difference That Catches Garage Owners Out
Profit
Profit is an accounting figure: sales minus costs, expenses, and overheads.
Cash
Cash is what’s actually in your bank account today.
You can be profitable on paper and still:
- Struggle to pay staff
- Miss tax deadlines
- Rely on overdrafts
- Delay necessary equipment replacements
Garages experience this more than most industries because cash timing is rarely aligned with the accounts.
Why Garages & MOT Centres Are Prone to Cashflow Problems
Garage businesses face unique pressures that don’t appear clearly in year-end accounts:
1. VAT is quietly draining your cash
VAT sits in your bank account and feels like available money — until HMRC demands it, quarterly, in one lump sum.
Many directors:
- Spend VAT unintentionally
- Don’t ringfence it
- Underestimate liabilities
By the time the VAT return is due, the cash is often gone.
2. Parts are paid for long before income lands
In garages:
- Parts are purchased upfront
- Suppliers want paying quickly
- Customers may pay later (or dispute bills)
The result? A timing gap: cash out now, cash in later. Your accounts may show profit, but your bank account feels the pinch today.
3. Big, lumpy costs hit without warning
Garages rarely have smooth cost patterns:
- MOT bay upgrades
- Equipment replacements
- Unexpected repairs
- Staff overtime
- Tool maintenance
One large unplanned cost can wipe out weeks of perceived profit if cashflow isn’t planned.
4. Director drawings without a plan
Many garage directors take money when it’s available, assuming that busyness equals cash.
This often leads to:
- Overdrawn director loan accounts
- Cash shortages
- Unexpected personal tax bills
The business funds the lifestyle — until it suddenly cannot.
The Illusion of Being Busy
One of the most dangerous assumptions in a garage business is:
“We’re busy, so we must be doing well.”
Busy does not mean cash-rich. You could be:
- Underpricing jobs
- Absorbing rising costs
- Losing money on some services
- Carrying hidden inefficiencies
Without proper visibility, volume can hide serious problems.
Why Year-End Accounts Don’t Solve Cashflow Problems
Many directors rely entirely on annual accounts.
The problem? By the time you see them:
- The year is over
- Cash is already spent
- Tax bills are locked in
Year-end accounts are backward-looking. Cashflow problems need live visibility, not hindsight.
The Tax Double Whammy
Garage directors often feel it twice:
- VAT — quarterly and unavoidable
- Corporation Tax — due months after year-end
This creates a dangerous cycle:
Profit made → Cash spent → Tax bill arrives → Panic begins
Without planning, tax feels like a punishment rather than a predictable cost.
Why “We’ll Catch Up Later” Rarely Works
We hear it all the time:
“Once this busy period settles, we’ll sort the numbers.”
But garages rarely slow down neatly. There’s always:
- Another MOT season
- Staffing challenges
- Supplier price increases
Delaying clarity doesn’t remove the problem — it magnifies it.
What Good Cashflow Control Actually Looks Like
Garages that thrive don’t rely on luck. They have:
- Clear visibility of cash at all times
- VAT separated from usable funds
- Planned and structured director drawings
- Regular financial reviews
- No guesswork — just clarity
Simple Cashflow Improvements That Make a Big Difference
You don’t need complicated systems. Start with:
- Regular bookkeeping
- Clear separation of tax money
- Monthly or quarterly reviews
- Someone asking the tough questions
Small, consistent improvements compound quickly.
Why This Isn’t About Cutting Corners
Cashflow control isn’t about:
- Skipping tax
- Delaying HMRC
- Cutting quality
It’s about timing, visibility, and control.
Good garages don’t just fix cars well — they manage money well.
The Emotional Cost of Poor Cashflow
Cash stress doesn’t stay at work. It affects:
- Sleep
- Confidence
- Decision-making
- Family life
Most directors don’t start a garage to lie awake worrying about VAT. They start it for independence and pride in their work.
What a Good Accountant Does Differently
A good accountant for garages and MOT centres:
- Talks about cash, not just profit
- Flags issues early
- Helps plan for tax obligations
- Challenges risky behaviour
- Keeps you informed, not surprised
They don’t just “do the accounts.”
Final Thought: Cashflow is the Fuel of Your Garage
Profit keeps score.
Cash keeps the doors open.
The garages that last longest aren’t always the busiest — they’re the ones with control over their cash.
How Hammond & Co Helps Garage Directors
We work with garage and MOT centre limited companies to:
- Understand where cash is actually going
- Plan for VAT and Corporation Tax
- Structure director drawings safely
- Remove financial stress from the business
If your business is profitable but you still feel cash-tight, it’s time to take a closer look — and regain control.