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The construction industry has embraced drone surveys, 3D modelling and AI project management, but still releases millions based on 19th century verification methods.
While almost every other aspect of construction has been digitised, payment verification remains stuck in the era of handshake agreements.
More than 2800 construction companies went into insolvency in 2024 alone, yet the industry continues operating payment systems that would be considered reckless in any other sector.
The contradiction is stark. Modern construction projects use BIM software that can model building components to millimetre accuracy, while sophisticated software is used to track every variation to material volumes and coordinate trades.
Yet, most developers still have no process for confirming that progress payments have reached the subcontractors who performed the work and are therefore releasing substantial sums of money based solely on statutory declarations that request trust but offer no verification.
Industry veterans know this story. Builder hits cash flow trouble from cost overruns, pricing mistakes, or delayed client payments. They keep collecting progress payments while quietly stretching payment terms to subcontractors for months before anyone notices as they attempt to keep their head above water.
Banking analysis shows that by the time payment issues surface, developers typically face exposure equivalent to three monthly progress payments. On a $50 million project, that's serious money. Then comes the painful reality of paying twice: first to the builder who didn't pass it on, then again directly to subcontractors.
Project trust accounts seemed like the answer. Ring fence the money, create legal protections. Queensland mandated them, then quietly hit pause in January 2025 when results didn't materialise.
Trust accounts provide legal recourse after problems emerge but offer no real time oversight. Builders can still withdraw funds for “legitimate project expenses” without proving they’ve paid trades. Account irregularities typically surface during compliance audits or insolvency proceedings, when recovery options are limited.
Joint bank accounts requiring dual sign off create paperwork nightmares while potentially making developers liable for builder decisions. Enhanced statutory declarations with personal liability still can’t distinguish between truth and fiction until after money disappears.
The fundamental issue persists. Without transparency mechanisms, developers are running sophisticated digital project management yet can’t be sure that the cost-to-complete number reflects reality.
The solution is simpler than regulatory fixes. Before approving each month’s progress payment, verify that subcontractors from the previous payment received their money. It applies digital verification principles used throughout modern construction to the payment process.
Builders will resist initially, preferring flexibility in managing payments across projects. But that flexibility shifts risk to developers, which becomes harder to justify given current failure rates.
You don’t need access to margins or contract values, just confirmation that claimed payments actually occurred. Modern payment platforms can automate verification without creating admin burden, integrating with existing project management systems.
Monthly verification creates natural checkpoints. Instead of accumulating exposure across multiple cycles, you limit risk to individual periods. Spot problems before releasing more funds.
This mirrors previous technology adoptions. Digital project management became mandatory within years. Payment transparency follows the same path as the logical next step in digital verification.
Early adopters gain competitive advantages: better lender relationships, fewer project stoppages, and proactive problem identification. As lenders make verification a loan condition, builders must adapt or miss out on projects.
Meanwhile, builders who proactively embrace payment transparency differentiate themselves from competitors, building stronger trust relationships with both developers and subcontractors who know they’ll be paid reliably.
The shift accelerates as burned developers implement enhanced controls. With climbing builder failure rates, there's a growing pool of educated developers driving change.
Voluntary adoption windows won’t remain open indefinitely. Victoria has introduced transparency legislation, other states will follow. Market driven solutions typically offer more flexibility than regulatory approaches.
Construction technology has revolutionised project delivery through digital integration. Payment verification represents the missing piece needing to catch up with existing capabilities.
The technology exists and works with current systems. Early adopters demonstrate successful implementation without workflow disruption.
The choice is leading through technological integration or waiting for regulatory mandates. Given industry conditions and existing digital infrastructure, waiting represents unnecessary risk exposure.
Payment transparency delivers measurable benefits: reduced developer exposure, reliable subcontractor payments, and better project continuity through integrated digital verification.
The industry has the tools to solve this problem proactively, we have the missing puzzle piece.
It comes down to market leaders to implement solutions that work, before commercial realities and regulatory mandates remove the choice.
To understand the various subcontractor payment transparency/control options for your next project, get in touch: visit www.ipex.com.au or reach out at https://ipex.com.au/contact/
The Urban Developer is proud to partner with Ipex to deliver this article to you. In doing so, we can continue to publish our daily news, information, insights and opinion to you, our valued readers.
