Why Transparency Matters More Than Ever In Residential Building
The residential building industry includes many skilled, well-intentioned people who genuinely want to deliver high quality homes. However, while strong construction knowledge is essential, there is currently no formal requirement for builders to have training in how to successfully run a business.
This gap does not reflect a lack of care or commitment. It reflects a system that assumes building skill automatically equals business skill, when in reality they are very different disciplines.
There is a clear opportunity for reform that would support clients, subcontractors, and builders alike. One practical and cost-effective option is for progress payments to be paid into an individual trust account for each contract, with only the documented builder’s margin specified in the contract allowed to be used for anything other than the hard costs of that project.
This single change would strengthen the financial clarity of individual projects, and would also protect small to medium builders who often have great teams and strong construction capability but lack experienced, conservative financial management. In many cases, business owners do not realise there is a problem until it is already well advanced.
It is common for builders to receive progress payments for one project, and then use those funds to address obligations from other projects or personal drawings. Aligning progress payments more closely with the individual project they relate to would create healthier, more sustainable business practices for builders and greater confidence for clients and subcontractors.
Looking ahead over the next five to ten years, there are three clear areas where industry reform could significantly improve outcomes for everyone involved:
- Trust accounts for every project, with audited books to confirm a minimum percentage of each progress payment is spent on that project.
- A minimum level of financial management or business training as part of the criteria for gaining a building contractor’s licence.
- Stricter requirements aimed at preventing phoenix companies to ensure anyone who has previously been in control of a failed building company faces greater scrutiny before being able to start again under a different entity or operating structure.
These changes are not about placing blame. They are about strengthening a system that is full of capable people and ensuring it continues to deliver great outcomes for clients, subcontractors and builders well into the future.
