If I had to guess one of your biggest challenges as an oil and gas contractor, I would say it is that work is not always consistent, and cash flow can often become a real source of stress. Am I right?
Every week, almost without fail, I speak to a contractor who earns very good money across the year, but still finds themselves worrying about cash flow when work slows down, or dipping into savings at the wrong time.
The problem
Oil and gas contracting does not usually follow a steady monthly pattern. You might have several months of high earnings, followed by a gap with little or no income at all. And then to make these worse, your next contract starts later than you expected.
The issue is that many contractors still treat their finances as if they are earning a regular monthly salary, when in reality the income is far less predictable.
Where it starts to go wrong
When I start working with a contractor for the first time, I see the same general patterns:
- Taking too much out of the company during high-earning periods
- Not setting aside enough to cover quieter months
- Paying large tax bills without having planned for them
- Relying on savings instead of structuring income properly
- No clear buffer for contract delays or cancellations
During busy periods, none of this feels like a problem. It is usually only later, when income slows or stops for a while, that it starts to become an issue.
The solution
The solution to your cash flow worries is not to try working longer hours to earn more. It is about managing what you already earn more carefully. As the saying goes, “work smarter, not harder.”
1. Separate “earning” from “spending”
One of the most useful shifts is recognising that just because your company earns the money, it does not mean you need to take it all out straight away.
Instead, think about what the company earns across the year, and what you actually need personally each month
Your personal income can be steady, even if your business income is not.
2. Build a buffer inside the company
Rather than taking everything out after a well-paid contract, leave a portion in the business.
This gives you coverage during gaps between contracts and flexibility if a contract is delayed. Importantly, it also gives you more choice around when you take income.
Without this, you can end up having to take money out at times that are not ideal.
3. Plan for tax before it becomes a problem
One of the most common issues I see is tax not being factored in early enough.
Instead of dealing with it later:
- Set aside money for corporation tax as you go
- Keep an eye on your personal tax position throughout the year
- Avoid situations where a large bill arrives without warning
These considerations alone remove a lot of unnecessary stress.
4. Smooth your personal income
Even if your contracts are irregular, your personal income does not have to be.
You can take a consistent monthly amount for personal use, and adjust dividends at specific points in the year. This avoids large swings in what you pay yourself, and also makes day-to-day finances far easier to manage, saving you time.
5. Expect gaps, and plan for them
Gaps between contracts are part of the job. The key is to plan for them in advance.
Ask yourself:
- How long could I comfortably go without a contract?
- Do I have enough in the company to cover that period?
- Would I need to take money out at a less efficient time?
If you are not sure, it is worth speaking to a specialist oil and gas accountant.
How I can help
If you want to speak to a specialist oil and gas accountant, I’m Martin Cook. And if you want to feel more in control of your income, especially between contracts, I’m always happy to have a no-obligation conversation.
Book a free call with me or call 07866 465 223, and we can look at how your income is currently structured and where things could be improved so you are not relying on guesswork.