Payment Terms

Cash flow drives up insolvencies in the construction sector

The CreditorWatch report also pointed out that the industry’s unique payment structures were also to blame.

EarlyTrade said prime contractors are trying to solve the issue of payment structures by scaling through technology to be able to process payments to subcontractors faster.

Contractors generally operate with payment terms of thirty days, but are increasingly opting for prepayment options.

“Earlytrade has seen a fivefold increase in contractor registrations as our clients try to boost productivity and deliver more to contractors through technology,” Saxelby said.

“Often, for contractors, it comes down to cash flow and cash conversion – with improved cash flow flexibility comes control to manage forward orders, retain staff and successfully navigate the boom.”

The Australian Construction Association has said that if the gap in productivity growth between the construction industry and other industries over the past 30 years could be cut in half, it would generate $15 billion worth of infrastructure every year for the same expenses and would employ 15,000 additional people.

“To deliver the record pipeline of infrastructure projects, the industry must innovate to find ways to do more with less…closing the productivity growth gap between construction and other major industries is essential. “said ACA Chief Executive Jon Davies.

Meanwhile, Western Australia remains the best performing state according to ASIC data, boosted by both its mining and agriculture sectors.

NSW however has the most regions with the highest default risks, including Bringelly-Green Valley with 7.81% and Guildford-Merrylands with 7.84%.

Defaults may increase in the Melbourne CBD as the Victoria region is the best performing in all of Victoria for default risk.

Northern Sydney and regional industrial areas remain stable, but West Sydney is grappling with default risk as many people living in West Sydney cannot work from home and are affected by restrictions.

North Queensland and agricultural centers perform better than tourist areas and the Gold Coast.

The healthcare sector remains the safest industry in terms of default risk and arrears.

Nationally, the risk of default stands at 5.7%.