Construction might be booming around the country, but beneath the surface, there are undercurrents of uncertainty according to Insolvency Australia, an independent marketplace for insolvency services.

Insolvency Australia has urged contractors, subcontractors and suppliers to take action to help mitigate any risks.

“As the collapse of Probuild and Condev Constructions shows, it’s going to be a tough year for many construction companies – and the domino effect can be devastating,” Insolvency Australia director Gareth Gammon says.

“When a business is placed into voluntary administration there are many moving parts, processes and procedures to follow, which is why it’s crucial that others impacted, like subcontractors and suppliers, take quick advice to protect their own position and develop a plan of action.”

Mitchell Ball, director of specialist insolvency firm Mackay Goodwin, says any subcontractors or suppliers who have been impacted by a collapse are to assume the debt is uncollectable – and that it’s important to assess their own businesses: “[My advice is to] immediately review your forecast and cashflow, which will allow you to determine your own business viability. You should always get on the front foot and seek professional help.

“Many big construction companies and builders are currently facing similar issues to Probuild and Condev, which gives us reason to believe they won’t be the only construction companies to go into administration or liquidation. The construction industry is facing an extensive list of challenges, primarily due to COVID, such as supply chain issues and delays, labour shortages, a reduced number of projects, oppressive contracts and rising costs of materials. These challenges all contribute to significant liquidated damages,” he says.

Insolvency Australia member Natasha Petrie, director of BRI Ferrier WA, provides ten key tips on actions to take to prevent and/or minimise risk:

1. Don’t panic.
2. Seek advice.
3. Be prepared to initiate a change.
4. Identify the problem – this will lead to the solution.
5. Understand your contractual obligations.
6. Review cashflow regularly.
7. Review liabilities regularly – remember the ATO is not your banker.
8. Stress test your business – work through a range of potential scenarios and be prepared for them.
9. Engage regularly with all parties associated with your business, this will create an understanding of circumstances.
10. Do a quick one page SWOT analysis.

“Most of the themes are re-occurring; it is about taking steps rather than doing nothing in the hope that it will go away,” she says.