New data putting heat on builders

MAJOR construction companies are getting better at paying subcontractors on time, as tradies tighten payment terms in the wake of high-profile builder collapses.

But there are warnings for small construction business owners to be hyper-aware of their income as bigger companies grapple with rising supply costs and the tax office resumes its enforcement action after a Covid-19 hiatus.

The Payment Times Reporting Register established by the Federal Government to monitor companies with income over $100m, has revealed which big businesses are paying subbies on time – and which are not.

The register shows average standard payment terms, which state how many days subbies wait for invoices to be paid. It improved by 2.62 days, to 37.88 days between June and December of 2021.

Additionally, the average number of invoices paid within 60 days increased by 1.91 per cent to 91.97 per cent of all invoices.

The scheme was introduced on a voluntary basis last year to improve payment outcomes for Australian small businesses, however from January this year, it is compulsory for all plus$100m companies to lodge payment data.

It comes amid a flurry of construction company collapses, including Condev, ProBuild and Pivotal Homes, with the latest ASIC data revealing the industry experienced its greatest number of administrations in a June quarter since 2015.

Some large local construction companies that opted against lodging for 2021, but will be required to do so this year, include Metricon, McNab, Alder Constructions, Descon Group Australia and Philip Usher Constructions.

While there was improvement in some companies who did lodge data, more than a quarter were still failing to pay within agreed times.

As well as helping small businesses know who they should and shouldn’t work for, the data could provide regulators with early clues of which big companies could be suffering cash flows problems.

For example, analysis of data for Probuild Constructions, which collapsed in February with $5bn of work under way, shows the company was a frequent late payer.

The register shows Probuild had standard terms of 30 days, but was paying late on 78.4 per cent of invoices in June 2021, the only time the company reported its payment times.

Probuild’s related civil construction company WBHO Infrastructure, also offering 30 days standard terms, paid more than 90 per cent of invoices later than standard, with more than a quarter of invoices still unpaid after 61 days.

Forensic accountant James Cook is director of Gold Coast company Debtplacer, which sells unpaid debts to debt collectors.

Mr Cook said the public data could be better used by regulators to proactively monitor the health of some of Australia’s largest organisations.

“Governments have been tightening up their payment terms for big projects, so regulators could use this data to make sure the major contractors are honouring their commitments down the line,” he said.

“From a small business point of view, it’s helpful as a benchmark to compare how they’re being paid with what the average standard payment terms are.

“For example if the industry standard payments terms are averaging 35 days and you’re being stretched out beyond 60 days, there are potentially some issues you have to worry about.”