Construction insolvencies are a notable threat in Australia… writes Jodie Rebbechi, MPAV General Manager
In the 2023/2024 financial year, over 2,800 construction related companies became insolvent nationally.
There are a number of factors contributing to this alarming trend — the ATO ramping up its efforts to collect the billions owing to them, tight margins due to higher operating costs, payment delays and supply chain disruptions just to name a few.
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Whether your a plumber, plasterer or painter protecting yourself starts with due diligence.
Stay ahead
Before doing business with a new builder, developer or construction entity, obtain a contractor risk report.
These reports give key business intelligence on prospective clients like insolvency warnings, ATO-reported tax debts, company director relationships, court actions, debt collections and insolvency risk factors.
This kind of insight can help you avoid taking on work that ends in unpaid invoices and legal disputes.
You can also protect your business from bad debt with Trade Credit Insurance.
When businesses go under, the impact is immediate and Trade Credit Insurance can play a role in minimising the impact on your business.
It replaces lost cashflow and safeguards profits, ensuring policyholders stay resilient. It provides Security to offer financiers, suppliers and shareholders.
And valuable information about your customers to assist ongoing credit management – e.g. if a debtor is not paying other Insured suppliers.
As Insolvencies remain high, can you afford not to protect your business against the risk of bad debt?
You also need to secure the right business insurance.
- Public liability insurance can cover claims related to injuries or damage caused during a job. While not mandatory in Australia, it’s broadly advised for tradies.
- Tool & equipment insurance offers protection against theft or damage of gear, minimising downtime.
- Income protection or personal accident/illness coverage can replace up to 75–85 per cent of your income if you’re unable to work.
Contractors need to have clear terms and conditions covering payment terms, excluded liabilities and detailed scope of work which may help protect you from costly disputes. They also need to prepare exit strategies and have contingency budgets in case a major contractor collapses.
If a contract becomes unprofitable due to payment delays or variations on the scope of works, sometimes its better to walk away rather than absorb more losses.
Take steps to protect your livelihood and keep your business resilient.
Get the support and advice you need by joining the Master Painters Association of Victoria/Tasmania.
For more information, please contact the Master Painters Association on 03 9813 5922 or email us at mail@mpav.com.au.
