Construction runs on a fundamentally misaligned cash flow model. Head contractors and developers want to preserve working capital and manage days payable outstanding (DPO). Subcontractors need fast, predictable payment to survive. When pressure builds, it does not stay neatly inside one supplier relationship. It moves through the project.

The Reserve Bank of Australia’s April 2025 Financial Stability Review states that insolvencies have been highest in construction and hospitality, with construction affected by high input costs, delays from labour and materials shortages, and the prevalence of fixed-price contracts. CreditorWatch’s September 2024 Business Risk Index reported that late payments were at their highest rate since March 2021 and that construction had the highest payment default rate at 1.77%.

For finance teams, the dangerous part is that the exposure is often real before it is visible. A subcontractor may already be stretched. A supplier may be behind with its own creditors. A project may depend on one trade that is quietly running out of cash.

None of that necessarily appears in the enterprise resource planning (ERP) system. The invoice can still look normal.

Security of Payment (SOP) laws make the control problem sharper.

Each Australian jurisdiction has its own regime. New South Wales has the Building and Construction Industry Security of Payment Act 1999. Victoria has the Building and Construction Industry Security of Payment Act 2002. Queensland has the Building Industry Fairness (Security of Payment) Act 2017. Western Australia has the Building and Construction Industry (Security of Payment) Act 2021.

The details differ, but the direction is clear. These regimes create statutory rights to progress payments, set response processes and allow disputes to move quickly into adjudication.

That changes the operating reality for accounts payable. A contractor submits a valid payment claim. The business misses a response deadline. The ability to dispute can narrow. An adjudication outcome can require payment before the internal dispute process has properly caught up.

This is the point many finance teams underweight: your best-designed controls can be legally bypassed.

Construction risk is distributed across finance, procurement, legal, project delivery and the supplier network. If those teams work from different information, the organisation ends up governing risk after it has already moved.

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The answer is not simply to add more approvals. More controls can slow the process without improving visibility.

The sharper move is to shift the point of intervention upstream. Finance leaders need a live view of supplier health, payment claim exposure and project context. Which contractors or subcontractors are showing payment stress? Which claims carry Security of Payment deadlines? What does legal know that procurement does not? Has the same issue appeared before on another project, supplier or trade package?

This is where RedOwl can sit naturally in the conversation: not as another approval layer, but as an enabling system for better governance. Its core moat is capturing, preserving and leveraging organisational memory to deliver real-time governance.

[Internal link opportunity: RedOwl “PO Governance Is Not Leakage Prevention” blog — https://redowl.ai/blog-post/po-governance-is-not-leakage-prevention]

In practice, that means supplier history, payment context, approval decisions, contract exceptions, dispute patterns and project risk signals cannot stay trapped in inboxes, spreadsheets or individual memory. They need to be available when the decision is being made.

A human still needs to apply judgement. Construction finance is too commercial and context-heavy to run on autopilot. But the person making the call should not be forced to rely on stale supplier reviews, scattered emails or a clean invoice that hides the actual risk.

In construction, you do not just manage suppliers. You inherit their risk.

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