Protecting Your Book: What Trade Businesses Can Learn From Australia's Construction Collapses
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Ask a builder about their biggest business risk and most will say finding the next job. But ask anyone who was owed money when Probuild collapsed in 2022, and they’ll tell you it’s actually getting paid for the work you've already done.
Construction has a payment problem that has nothing to do with how good you are at the work. It's structural, it's been getting worse for years, and the numbers make that hard to argue with.
Half of all claims come from one industry
The most recent figures from trade credit insurer NCI put building and hardware at 50.5% of all incoming claims by number. Everything else in the Australian economy makes up the other half.
By value it's the same picture. Around $2.49 million in claims from building and hardware, against $1.65 million for food and provisions in second place. Manufacturing, electrical and labour hire trail well behind.
If you supply the construction industry, non-payment isn't something that happens to unlucky businesses. It's the ordinary risk of your sector, and pricing your work as though it isn't will eventually catch up with you.
Size tells you nothing
The instinct most owners have is that large customers are safer. The recent history says otherwise.
Probuild was one of the largest commercial builders in the country with billions of dollars of work on the books. Administrators were appointed in February 2022 and the debts ran to hundreds of millions.
PBS Building was running major commercial and residential projects across Queensland, New South Wales and the ACT. It entered administration in March 2023 owing more than a thousand creditors over $25 million.
Porter Davis Homes had forecast $555 million in revenue for the 2023 financial year. When it collapsed in the March of that year it left 1,500 homes unfinished in Victoria and another 200 in Queensland, and 470 people without work.
Here's the detail worth sitting with. In the Probuild and PBS cases, credit insurers had cover in place right up to the collapse, and the aggregate limits suggested both businesses were healthy. The people whose job is to spot a company about to fail didn't see these coming either.
If the professionals reading the financials were surprised, a subcontractor working off a purchase order had no chance.
The warning signs that do exist
There is one exception worth knowing about.
In January 2023, an insurer withdrew cover on the Porter Davis group citing a lack of financial transparency. The company collapsed roughly two months later.
That's the pattern. The people closest to the credit data move first. Suppliers usually find out when it's announced.
You can't see insurer decisions from where you sit. But you can watch for the things that tend to travel with them:
- Payment terms quietly stretching from 30 days to 45, then 60
- Progress claims being queried in more detail than usual
- A customer asking to extend terms on new work while old invoices are still outstanding
- Key finance staff leaving
- Subcontractors on the same site mentioning they're waiting on payment
None of these prove anything on its own. Several at once, from a customer who represents a large share of your revenue, is worth acting on.
Two ways to protect the book
Most trade businesses carrying real exposure end up doing some version of these two things.
Trade credit insurance covers up to 90% of the debt if a customer fails. The obvious benefit is that you don't wear the full loss. The less obvious one is speed. When Probuild collapsed, NCI paid one creditor's claim in full 13 days after it was lodged. Every other creditor joined the administration queue, where recoveries typically arrive years later as cents in the dollar.
That gap between 13 days and several years is the whole argument for cover, and it's more persuasive than any discussion of premiums.
Invoice finance solves the timing problem rather than the failure problem. It advances up to 80% of your invoice value within 24 hours, so you're not funding 60 or 90 days of your customer's payment terms out of your own working capital.
They address different risks and they work well together. Insurance protects you if the customer fails. Finance means you're not carrying the gap in the meantime.
There's also a practical link between them. Where a trade credit policy is in place, the proceeds can often be assigned to a financier, which strengthens a funding application by securing the underlying debt. If you're considering both, mention the policy when you apply.
What this means for taking on bigger work
The reason any of this matters isn't defensive.
Trade businesses turn down work they could deliver all the time. Not because they lack the crew or the skills, but because they can't fund the gap between starting a large job and getting paid for it. Materials and wages leave the account months before the first progress claim clears.
So the job goes to someone else, and the business stays the size it was.
Protecting your receivables and arranging access to the cash inside them changes what you're able to attempt. That's the actual return on both, and it doesn't show up in a discussion about premiums or fees.
Where to start
Work out which customers you genuinely couldn't afford to lose. Most owners can name them without checking. Then look at what a failure would do to your next twelve months.
If the answer is uncomfortable, that's worth addressing while everything is running normally.
Brunswick advances up to 80% of your invoice value within 24 hours, so the payment terms of a large client stop dictating what your business can take on.