Developers are often the last to know when subcontractors haven’t been paid on their project, but it can very quickly become their problem. Paul Reid, CEO of online construction payment platform IPEX, is tackling the issues of non-payment in the construction industry head-on.
“The ‘stat dec’ process is largely ineffective at identifying payment issues, so we’ve combined a suite of practical controls with existing legal protections to help ensure progress payments are reaching subcontractors & suppliers” Mr Reid said.
The IPEX platform allows builders to access payment for their preliminaries, margin & direct costs, but the balance of each progress payment is set aside & can’t be withdrawn by the builder – these funds can only be used to pay subcontractors & suppliers linked to the project. All transactions are documented, providing a clear audit trail should the builder enter administration.
Developers are given high-level visibility over account transactions, allowing them to confirm that all subcontractors & suppliers have been paid as expected before they approve further claims, but builders needn’t worry – contract & payment values typically remain confidential.
“The platform ‘guardrails’ make sure the right thing happens which means builders can demonstrate they’re paying subcontractors without revealing their margins” Mr Reid says.
The IPEX approach not only ensures that developer/lender funds are being used for their project, it’s also helping ‘good’ builders stand out in the tender assessment.
“For builders who already pay their subcontractors on time, nothing really changes under IPEX” Mr Reid said. “This is why IPEX also serves as a ‘logic check’ on builder financial due diligence – only those with intent to shift money into other projects have a reason to object to ring-fencing of funds”.
Reducing developer risk is also proving to be a big plus in terms of winning new contracts.
“It’s a question we get asked all the time; every developer & lender we meet wants to know which builders are willing to work under IPEX. We’ve now got a handful of builders who are seeing it as a differentiator, a way to prove that they’re well managed and in a good position. It gives them a big edge”
Builders are also reporting that protecting subcontractor payments is resulting in significant savings from trades.
To further mitigate risk of payment fraud or ‘invoice redirection’, IPEX thoroughly vets all subcontractors and suppliers, including verification of bank account details. “BSB & Account Numbers are then cross-referenced with the payment file the builder submits,” explains Mr Reid. “If they don’t match, the payment is not processed”.
Mr Reid said the platform is essentially an insurance policy for developers & lenders.
“We’re not just about catching out the few truly ‘bad guys’ who are out to deceive,” he states. “This is about protecting a project against the unknown. The high value/low margin nature of construction means very little needs to go wrong before a ‘healthy’ builder is suddenly in trouble”.
“IPEX doesn’t change the agreement between a developer & their builder, it just provides the developer with enough transparency & oversight to confirm that the contract is being honoured. We go above and beyond to ensure that funds are going where they’re meant to be, even if the builder does experience cashflow difficulties or even enters administration.”
To find out how IPEX can be implemented on your next project, get in touch with IPEX CEO Paul Reid ([email protected]) or visit www.ipex.com.au