The construction industry in Australia, particularly in Tasmania, faces significant challenges in 2024. Rising material costs, supply chain delays, and interest rate pressures have created a volatile environment. Tasmania’s unique economic landscape—with a high dependence on local suppliers and smaller-scale projects—means even slight disruptions impact cash flow for construction businesses and associated industries. The strain in construction also ripples through related sectors, such as real estate, finance, and manufacturing. Tasmanian suppliers who work closely with construction firms are also seeing delayed payments and cash flow interruptions as developers and contractors grapple with tighter budgets and financial strain.
To mitigate the risks associated with these uncertainties, businesses that extend credit to clients in construction or related industries need to consider proactive measures to protect themselves against losses. Director Guarantees are a particularly effective tool in this landscape. By securing a personal guarantee from the directors of a company before extending credit, a business adds an extra layer of protection in case of default. A Director Guarantee allows creditors to hold company directors personally accountable for unpaid debts if the business cannot meet its obligations, offering a potential recovery route that could make the difference in securing funds. While this doesn’t eliminate the risk, it does increase the likelihood of recovering owed funds if the client’s business faces insolvency or other financial struggles.
Beyond Director Guarantees, businesses can take several other steps to safeguard their interests. Thorough credit checks on potential clients, regular monitoring of key accounts, and ensuring clear payment terms are essential. Tools like Equifax reports provide insights into the creditworthiness of new and existing clients, helping businesses identify high-risk clients before financial commitments are made.
As economic pressures continue to affect the construction industry, Tasmanian businesses supplying goods or services on credit should remain vigilant and prioritise strong credit management practices. By implementing protective measures, such as Director Guarantees and vigilant credit monitoring, businesses can weather these challenging times with greater security and maintain healthy cash flow even in a shifting market.