Why Australia’s Construction Industry Needs Trade Credit Automation

The Australian construction sector is navigating a challenging landscape characterised by supply chain disruptions, escalating costs, and the pressure of fixed-cost contracts. Construction, vital for contributing to infrastructure, commercial, and residential development, encounters amplified risks in managing cash flow and credit amidst these macro challenges.

The pandemic era’s government and central bank support maintained low default rates within the industry. However, as we transition away from this period, the sector confronts a “perfect storm”: supply chain disruptions leading to project delays, significant cost inflation from materials, energy, labour shortages, and the constraints of fixed-cost contracts, which often result in defaults or completion at substantial losses.

According to ASIC statistics, recent trends show a concerning rise in insolvencies within the construction industry, with an 82% increase over the same period last year.

This places construction as the leading sector in Australian insolvency statistics, significantly ahead of the next—food and accommodation services.

Given this backdrop, trade credit automation emerges as a critical tool for mitigating credit risk in the Australian construction industry. It provides a sophisticated alternative to traditional methods such as trade credit insurance. This technology-driven solution offers a proactive approach to managing the financial aspects of construction projects.

How Does Trade Credit Automation Work in Australia?

Trade credit automation leverages technology to streamline the credit management process, including risk assessment, monitoring, and debt collection. By automating these processes, companies can more efficiently manage their accounts receivable, reducing the time and resources spent on manual tasks.

This technology allows for real-time credit risk assessment, continuous monitoring of clients’ financial health, and automated payment reminders. This reduces the likelihood of non-payment due to insolvency, bankruptcy, or protracted default.

Why is Trade Credit Automation Important for the Australian Construction Industry?

The complexity of transactions in the construction industry, involving multiple parties such as subcontractors, suppliers, and owners, often leads to delayed payments and financial instability. Trade credit automation provides a more efficient way to manage these complexities, ensuring timely payments and improving cash flow.

Automated systems can help construction businesses extend credit with greater confidence. It can also help oversee whilst maintaining financial stability despite the industry’s current challenges. Additionally, automation offers peace of mind by reducing the administrative burden of credit management and debt collection.

Choosing the Right Trade Credit Automation Solution

When selecting a trade credit automation solution for your construction business, consider the following:

  • Integration capabilities: Ensure the solution seamlessly integrates with your existing financial systems.
  • Customisation: Look for solutions with customisable risk assessment criteria and notification settings.
  • User-friendly interface: Choose a platform that is easy to use and requires minimal training.
  • Support and updates: Opt for providers that offer ongoing support and regular updates to adapt to changing market conditions.

Trade credit automation stands out as a valuable asset for the Australian construction industry. It promises enhanced financial control, risk management, and operational efficiency. As the sector moves forward, embracing automation will be key to successfully navigating its complex financial landscape.

For more insights into how trade credit automation can transform your business operations and for a complimentary consultation, contact our Trade Credit Automation experts at 1Centre.

1Centre is setting a new standard in trade credit customer management. As a SaaS platform, we move beyond traditional checks by integrating with credit bureaus and surpassing them. With cutting-edge advancements such as face-match ID verification, guarantees, trade reference checks, built-in anti-fraud measures and 24/7 surveillance of your live credit book, 1Centre empowers businesses to process trade credit applications within minutes safely and efficiently. We call it trading with trust.

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