Warning signs your major client is heading for administration

The problem with waiting until the phone call

When a client's directors appoint an administrator, the conversation changes immediately. You move from chasing an invoice to joining a creditor queue, and the money you are owed becomes a claim against limited assets.

By the time you receive formal notice of the appointment, the opportunity to secure your position has passed. Work has been delivered, materials are on site, and the balance sits as an unsecured debt.

The question worth asking is not what to do after administration begins, but what you can spot beforehand and what options you still have while the account is live.

Payment delays and explanations that keep changing

A client who has always paid on time starts missing dates. The first delay may have a plausible explanation, but when the story changes each time you follow up, the pattern matters.

Frequent project delays, requests for early progress payments from their own customers, or a sudden push to renegotiate retention terms can indicate tightening cash flow. These signs do not prove insolvency, but they are reasons to review the account closely.

Keep a dated record of what was promised and when. If payment explanations become vague or contradictory, treat that as a prompt to act, not a reason to wait for next month.

Source: Protecting your cash flow: Key steps for small businesses to get paid on time

Operational changes and reduced communication

Changes in how a client operates can signal financial pressure. Reduced site activity, high turnover of staff or subcontractors, substitution of specified materials with lower cost alternatives, and declining responsiveness to routine queries are all observable indicators.

None of these signs in isolation proves that administration is imminent. But when several appear together, your exposure deserves a closer look.

If the client who once replied promptly now goes silent for days, or if you hear complaints about non-payment from others in the supply chain, those are reasons to review your own position and the balance outstanding.

Steps to take while the account is still trading

First, confirm the exact balance owed and whether any disputed items are holding up payment. Separate what the client has acknowledged from what remains unresolved.

Review your contract terms and check whether further deliveries or work are planned. Decide whether to continue, request payment upfront, or pause until the outstanding account is addressed. Changing or suspending contracted work may have its own consequences, so take advice before stopping supply.

If you hold retention money or a retention of title clause, check that your paperwork is in order. A Personal Property Securities Register interest must be registered before insolvency to be effective. Registration is not a guarantee of recovery, but it can improve your position if administration does follow.

Keep all correspondence, invoices, delivery records, variations and payment history together. If the situation deteriorates, you will need this file quickly.

Source: NSW Small Business: Protecting cash flow (PPSR registration)

Understanding what happens if administration is called

Once a voluntary administrator is appointed, unsecured creditors generally cannot begin or continue legal action without the administrator's consent or court permission. The administrator investigates the company's position and reports to creditors on available options.

Creditors then vote on whether to return the company to the directors, approve a deed of company arrangement, or move to liquidation. Recovery depends on the assets available, the administrator's costs, secured creditor claims, and employee entitlements, which have priority.

There is no fixed rate of return for unsecured creditors. The outcome depends on the facts of that administration and what remains after priority claims are met.

Source: ASIC: Voluntary administration, a guide for creditors

Practical decisions when exposure is growing

If the warning signs are mounting and the debt is material, get advice on your options now. That might include a formal demand, negotiating a payment arrangement, or reviewing Security of Payment rights if the work is construction-related.

Do not assume that continuing to supply will preserve the relationship or that goodwill alone will result in payment. Make a commercial decision about how much more exposure you are willing to carry.

Set a date to review the account and decide who will handle the next step. Waiting for certainty can mean waiting until administration is announced, and by then your practical options have narrowed.