Construction Debt Recovery: An Adviser's Guide
Construction is a payment-claim industry built on progress draws, retention and long contractual chains. This guide helps you advise builder clients on overdue accounts and refer them well.
In this guide
- Understand how progress claims and retention drive construction cashflow
- Recognise the common reasons head-contractor payments stall
- Spot the red flags that signal a debt is at real risk
- Know what documents make a construction referral strong
- Frame a clean handover for a builder client
7 min read
How construction gets paid
Construction rarely works on a single invoice. Most jobs are paid in stages against progress claims — a contractor submits a claim for work completed to date, the head contractor or principal assesses it, issues a payment schedule, and pays the certified amount. A slice is often held back as retention (commonly five per cent) until practical completion and again through the defects liability period.
For your client, this means money is tied up at several points at once: a current claim awaiting certification, retention sitting upstream, and sometimes a final claim that nobody is in a hurry to settle. Each layer is a different conversation, and each can stall for different reasons — which is why a construction debt is rarely as simple as “they haven't paid the invoice”.
Why payments stall
The classic flashpoint is the gap between what was claimed and what was certified. A head contractor short-pays a progress claim, attaches a payment schedule disputing scope or quality, and the subcontractor is left arguing over the difference. Variations done on a handshake are another reliable source of trouble: the work was instructed verbally, the cost was never agreed in writing, and now it is contested.
Cash also flows downhill slowly. When a principal is slow to pay the head contractor, that pressure is passed straight down to subbies, regardless of their own contractual entitlements. By the time an account reaches an adviser's books as “overdue”, it has often been quietly disputed for weeks.
Security of Payment and red flags
Every state your clients work in — QLD, VIC, NSW and the ACT — has Security of Payment (SOP) legislation that gives contractors a statutory right to progress payments and a rapid adjudication path for disputed claims. The catch is that these regimes run on tight, unforgiving deadlines. A payment claim must be valid, and a response to a payment schedule often must be lodged within days, not weeks.
The red flags to watch for: a debtor who suddenly raises “defects” only after a claim falls due, retention that is never released after practical completion, a builder slowing payments across several subbies at once, or a project entity that looks thinly capitalised. Any of these means the clock is the enemy.
How Merion recovers it
Merion handles commercial construction debts on a commission-only, no recovery no fee basis, so a client can act on a disputed claim without an upfront cost. The first step is a structured review of the contract, the claims, the payment schedules and the prior correspondence — because in construction the paperwork is the case. From there a formal, professional demand is made, and a genuine dispute over scope is separated from a debtor simply stalling.
Because SOP timeframes are short, early referral matters. You can pass a matter on through refer a debt, or send the contract and claims for a no-cost view via a free debt appraisal.
Key takeaways
- Construction is paid in stages — progress claims and retention both tie up money.
- Most disputes start in the gap between what was claimed and what was certified.
- Security of Payment regimes are powerful but run on very tight deadlines.
- Early referral preserves options; a stalled claim only gets harder.
FAQ
Can a debt be recovered if the head contractor disputes the claim?
Often, yes. A short-paid or disputed progress claim can still be pursued, and a genuine dispute can be separated from stalling. The contract, claims and payment schedules drive the assessment.
What documents should my builder client gather first?
The contract or subcontract, the progress claims, any payment schedules issued in response, evidence of variations, and a note of prior contact. Strong documentation is the single biggest factor in construction matters.
Does Security of Payment legislation affect timing?
Yes. SOP regimes give contractors strong rights but run on short statutory deadlines, so referring early keeps the most options open. This is general information, not legal advice.
Refer with confidence — in any industry
Commission-only recovery your clients can trust. No recovery, no fee.