The Financial Fault Lines in Construction

The State of the Construction Industry

Construction remains one of Australia’s most important industries, and one of the toughest to run profitably.

Even with strong demand across residential, commercial and infrastructure projects, many builders and subcontractors are feeling the pressure. Insolvencies are rising, payments are taking longer to arrive, and project costs are harder to lock down than ever.

For many businesses, the problem isn’t a lack of work. It’s the financial strain that builds quietly as projects progress — often without warning — until cash flow tightens or margins disappear.

This article looks at the financial pressure points affecting construction businesses today, and what practical steps can help reduce risk and regain control.

Cash Flow Crunch and Insolvency Risk

The problem: You’re doing the work, but the money arrives late.

Construction recorded the highest insolvency rate of any sector last financial year, with cases jumping almost 21 per cent to 3,595 as cash pressure pushed small businesses into debt restructures. A major driver of that pressure is cash flow.

Long payment terms, delayed progress claims and retention money can leave construction businesses funding projects out of their own pocket. Labour, materials and overheads still need to be paid on time, even when clients or head contractors don’t.

When cash flow tightens, the impacts stack up quickly:

• Payroll becomes stressful
• GST, PAYG and super obligations slip
• Supplier relationships come under pressure

In construction, businesses rarely fail from lack of work. They fail when delayed payments choke cash flow.

What helps:

• Keep a 13-week (3-month) cash-flow forecast so you can see pressure building before it hits.
• Track progress claims and retentions carefully. Unpaid money is easy to lose sight of.
• Invoice as soon as milestones are reached and review cash flow weekly, not monthly.
• Follow up overdue payments early rather than letting them slide.

Eroding Margins and Job Cost Blowouts

The problem: Jobs look profitable on paper, until they aren’t.

Material and labour costs can change fast. Steel and timber pricing moves. Subcontractor rates rise. Variations creep in. Before long, a solid quote no longer reflects reality.

A common issue is visibility. Many businesses only realise margins have disappeared at the end of the financial year, when jobs are complete and there’s no chance to fix pricing or recover losses.

What helps:

• Use job costing that tracks labour, materials and overheads by site, not just total spend.
• Monitor project margins while jobs are running, not after they’re finished.
• Compare quoted costs to actuals regularly to refine future pricing.
• Build contingency buffers into quotes for volatile inputs like fuel, steel and timber.
• Where possible, link project management software with your accounting system so financial performance is visible in real time.

If you don’t know which jobs are making money while they’re running, you’re flying blind.

Labour Shortages and Compliance Risk

The problem: Finding workers is hard, and getting it wrong can be expensive.

Labour shortages have pushed wages higher and increased reliance on contractors and labour hire. In the rush to keep sites moving, worker classifications are sometimes blurred, creating exposure to super, payroll tax and ATO penalties down the track.

At the same time, WHS and insurance obligations can slip when businesses are stretched thin.

What helps:

• Make sure contractors and employees are classified correctly from the start.
• Stay on top of superannuation (12%), PAYG and payroll obligations. 
• Use digital timesheets or workforce systems to improve records and accountability.
• Review Workcover and WHS processes regularly, especially when staffing models change.

These issues often don’t show up immediately. They surface later, when audits, disputes or claims arise.

Getting Ahead of the Pressure

Construction has always been challenging, but the margin for error is now smaller than ever.

The businesses that stay strong are the ones who have a clear handle on their numbers. They understand their cash position, track job performance closely and address issues early, before they turn into serious problems.

With the right financial visibility and advice, it’s possible to stay in control, even in a volatile environment.

How Bonerath & Co. Supports Construction Businesses

At Bonerath & Co., we work with builders and subcontractors who want clearer control over cash flow, job performance and risk — not just year-end numbers.

Our team helps construction businesses to:

• Build cash-flow forecasts to identify pressure points early and plan around payroll, tax and supplier costs.
• Set up job-costing and margin tracking so profitability is visible while projects are still underway.
• Compare quoted costs to actuals to improve pricing accuracy and reduce job blowouts.
• Track progress claims and retentions to ensure cash owed isn’t overlooked.
• Review payroll, super and contractor arrangements to reduce compliance and audit risk.
• Improve systems and reporting by integrating accounting data with project management tools.

We understand how financial decisions play out on site, not just in the accounts. If you want practical support that reflects how construction actually operates, our team understands construction from the project level through to the balance sheet.

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