Early warning signs a builder may not pay: what to check before the invoice is overdue
Why waiting until liquidation leaves you with few options
When a construction company enters liquidation, liquidation costs including the liquidator's fees are paid before priority unsecured creditors such as employees, subject to the rights of any secured creditor. Trade creditors are paid only if there are funds left over after payment of liquidation costs, secured creditors and employees.
The time to act is before insolvency is formally declared. Once a liquidator is appointed, your options narrow sharply and recovery becomes a question of whatever assets remain. Understanding what warning signs look like gives you time to protect your position while practical steps are still available.
Recognise the common early warning signs
Payment behaviour often changes before a business becomes formally insolvent. Invoices that were previously paid within agreed terms suddenly stretch to 60 or 90 days. When you follow up, the explanations change each time: a bank transfer delay one week, an accounting problem the next, a customer payment issue the week after that.
Reduced communication is another signal. Emails and calls go unanswered for longer periods. The person who used to handle accounts is no longer available, and you are passed between different staff members who cannot confirm payment dates.
These patterns do not prove insolvency, but they are reasons to review your exposure and ask direct questions about the outstanding balance. Waiting for another month rarely improves the situation.
Source: Victorian Building and Plumbing Commission research on builder insolvency
Check their payment pattern across your account
Pull the customer's payment history from your accounts system and lay it out in date order. Look for a deteriorating trend: invoices paid within 30 days six months ago, then 45 days three months ago, now approaching 70 days overdue.
Check whether recent payments have been partial amounts or rounded figures that do not match specific invoices. This can indicate the customer is prioritising other creditors or managing a cash shortage by spreading small payments across multiple suppliers.
If your most recent invoice remains unpaid while earlier ones were settled, ask why. A genuine dispute about quality or scope should be raised at the time of invoicing, not weeks later when payment is due.
Source: Victorian BPC research on construction financial distress
Review your current exposure before taking more work
Add up what the customer currently owes you and compare it with the size of the next job they are asking you to quote. If you already have two overdue invoices totalling a significant amount and they want another large supply of materials or labour, consider your total exposure carefully.
Ask yourself whether your business can afford to lose that amount. If the answer is no, you need a plan before you commit to more work. That plan might involve negotiating shorter payment terms, requiring progress payments at delivery rather than at month end, or asking for payment of overdue amounts before starting new supply.
Some businesses assume a long trading relationship means continued payment. Financial pressure does not respect past goodwill. A customer who has always paid may stop when their own cash runs out.
Search public records if concerns are building
Check the ASIC register for the customer's legal entity name and Australian Company Number. Confirm that the company is still registered and not under external administration. The register will show if a liquidator, administrator or receiver has been appointed.
ASIC's published notices website lists companies that have entered voluntary administration or liquidation. A search takes minutes and can confirm whether formal insolvency proceedings have started without your knowledge.
If the customer is a sole trader or partnership rather than a company, search the Australian Financial Security Authority National Personal Insolvency Index for any bankruptcy records. Know which structure you are dealing with before problems develop.
Document everything while the account is still live
Gather the signed contract, purchase orders, invoices, delivery dockets, email approvals for variations and payment correspondence into one file. If the customer later disputes the debt or enters insolvency, this documentation establishes what was agreed and what remains unpaid.
Keep a log of your follow-up attempts: dates, the person you spoke to, what was promised and whether that promise was kept. This record helps you distinguish between temporary delays and a worsening pattern.
Organising records now is faster and more reliable than trying to reconstruct events months later when key people have left or emails have been deleted. Good documentation also supports any formal recovery steps you may need to take.
Decide your next step while options remain open
If warning signs are present and your exposure is significant, get advice on your available options before the customer's position deteriorates further. Depending on your contract, jurisdiction and the facts, this might include a clear written demand, negotiation of a documented payment arrangement or preparation for formal recovery action.
Security of payment legislation in several Australian states gives construction contractors and suppliers statutory rights to progress payments and adjudication. These rights generally operate while the customer is still trading and can close or become more difficult once a liquidator is appointed.
The gap between noticing a problem and taking action is where recovery opportunities are often lost. By the time you decide something must be done, the customer may have restructured, moved assets or entered formal insolvency. Set a review date, act on it and do not wait for the situation to resolve itself.
Contact CRP to review your position
If you are concerned about a customer's ability to pay or you are carrying significant overdue invoices, bring the account records together and contact CRP. The team can help you understand what the warning signs mean for your situation and what practical steps are available now.
Use the contact form below to explain what is happening with the account. Early review costs less than waiting until formal insolvency removes your options.