By Jesse Fowler, Founder of J&J Renovations and J&J Plumbing Services
The cash flow gap is the number one killer of Australian trades businesses. The cash flow gap has nothing to do with bad workmanship or a lack of jobs. It is the 30 to 60 day wait between finishing a $10,000 job and getting paid that sends tradies under.
I run both J&J Plumbing and J&J Renovations, so I see the cash flow gap from both sides of the payment chain. As a plumber, I front materials, pay my crew weekly, then wait for the builder to pay me. As a renovation operator, I need to pay my subbies on time while waiting for client progress payments that arrive on a completely different schedule. Everyone in the chain looks solvent on paper. In practice, we are all stretched thin.
And the numbers prove it is not just me.
Cash Flow Gap Causes More Construction Failures Than Anything Else
Construction accounts for roughly 27% of all corporate insolvencies in Australia, even though the sector makes up less than 10% of GDP. In FY2024 to 2025 alone, 3,595 construction businesses entered insolvency. That number has been climbing year on year. Between June 2022 and March 2025, more than 7,600 construction firms went under.
Here is what matters most. ASIC data shows 52% of external administrators’ reports name the cash flow gap or high cash usage as the primary cause of failure. Not trading losses. Not bad strategy. The simple mismatch between when money goes out and when it comes back in.
Meanwhile, 79% of those insolvent businesses had fewer than 19 employees. These are not large developers or tier-one builders. They are plumbers, sparkies, chippies, and small renovation companies with full order books and empty bank accounts.
The growth trap makes this even worse. Every new job you take on before the last one pays out deepens the hole. You look busier and more profitable while the cash position deteriorates underneath.
53% of Invoices Are Paid Late and It Costs $28,800 a Year
Contractual payment terms in construction average about 38 days. However, Xero’s analysis of 150,000 businesses found that 53% of all invoices are paid outside the agreed window, averaging 23 days late. So a 30-day term becomes 53 days in reality. A 45-day term stretches to 68.
Only 58.6% of small business invoices in construction get paid within 30 days. Compare that to 84.7% in financial services. Construction is the worst-performing sector for payment timeliness.
The financial damage from late payments adds up fast. Late payments cost Australian SMEs roughly $2,400 per month, or about $28,800 per year. Across the economy, small businesses are collectively owed $115 billion in overdue invoices at any given time. B2B trade payment defaults surged 68.1% in the year to August 2024, with construction responsible for nearly a quarter of all ATO tax debt defaults over $100,000.
For a plumber running three or four concurrent $10K jobs, this means fronting $12,000 to $16,000 in materials and wages before a single dollar comes back. If even one builder pays late or goes bust, the domino effect is immediate.
The Dual-Role Squeeze Compounds the Cash Flow Gap
Operating on both sides of the payment chain creates a compounding effect that most industry commentary only describes in theory.
As a subcontractor, I am at the mercy of builder payment timelines. As a builder, I carry the obligation to pay subcontractors promptly regardless of when my clients pay me. The Reserve Bank has noted that the median builder carries roughly 40% of total liabilities as short-term unsecured trade credit, about double the figure for other sectors.
When Probuild collapsed in 2022, it left 2,300 creditors chasing $300 million. Porter Davis went down in 2023 with $557 million in debts. Trade creditors were told they would likely receive nothing. Each collapse sent shockwaves through dozens of subcontractor businesses already navigating their own cash flow gap.
So what fills the cash flow gap? Right now, most of us default to personal credit cards and savings. ScotPac’s SME Growth Index found that 67% of SMEs use personal finances to bridge cash flow shortfalls. Only 13% of eligible businesses use any form of invoice financing.
Invoice Financing Solves the Product Problem but Not the Awareness Problem
Platforms like Marmalade charge a flat 2 to 5% per invoice with no contracts and no lock-in. A $10,000 invoice at 3% costs $300 to access within 24 hours. Butn offers a similar model at roughly 2.5% per transaction, integrated directly with MYOB. ScotPac provides selective invoice finance for businesses with at least $10,000 in monthly invoicing.
These tools address the cash flow gap directly. Instead of waiting 45 to 65 days for a builder to pay, you get the cash now and pay a small fee. For trades businesses doing $5K to $15K jobs, a 2 to 5% cost is often cheaper than the overdraft interest, late supplier penalties, and missed opportunities that pile up while you wait.
Yet Australia’s invoice finance penetration sits at just 3.9% of GDP, compared to 15.5% in the UK. The barriers are simple. Most tradies do not know these tools exist. Those who do worry that using invoice finance signals financial distress to their customers. And traditional factoring products, with 12 to 24 month lock-in contracts, reinforced that perception for years.
The newer per-invoice platforms have solved the product problem. No contracts. No whole-of-book requirements. Simple flat fees. Accounting software integration. The awareness problem is what remains.
The Cash Flow Gap Will Not Fix Itself
Legislation is moving, but slowly. Victoria endorsed 28 reform recommendations in late 2024, including capping payment terms at 25 business days. The federal government took seven years to respond to the Murray Review’s 86 recommendations. None of these help a plumber waiting on a $10K payment this month.
The cash flow gap is a structural problem. It will keep crushing trades businesses until operators understand they have options beyond personal credit cards and white-knuckling through to the next payment cycle.
I am not here to sell invoice financing. I am here to say the gap is real, the tools exist, and most tradies still do not know about either.
Jesse runs J&J Plumbing and J&J Renovations. He writes about the cash flow realities of operating on both sides of the construction payment chain.