Major challenges facing construction businesses

Major challenges facing construction businesses

Construction is a $360-billion industry in Australia, producing 9% of the country’s gross domestic product. It covers a wide range of services, from site surveys and structural building to renovations and maintenance work. The industry also has a 2.4% projected annual growth rate over the next five years.

Yet despite these promising numbers, many construction businesses face many major challenges. If you are running your own construction company, you may already be experiencing the challenges listed below.

Skilled labour shortage

While there’s always a need for construction work in Australia, there are not enough skilled workers to meet the demand. Part of the issue is younger generations aren’t flocking to a career in construction, causing apprenticeship enrolment to drop. What’s more, lack of investment in skills training means fewer workers are qualified to do construction jobs properly and efficiently.

The best way to cope with these shortages is to make sure you’re attracting the most talented candidates for the job. For instance, you can write more appealing ads in high-traffic websites like SEEK and Indeed. You should also connect with potential candidates in trade shows and career fairs.

Another method to face the skilled labour shortage is training. Developing in-house training and sponsored apprenticeship programs is a great way to nurture qualified workers for your company.

Growing material costs

The rising cost of raw building materials can hurt a construction company’s profit margin. Additionally, disasters like the recent bushfire crisis severely affect supply lines and increase demand for materials, making prices go up.

This is especially concerning for small- and medium-sized organisations that already have problems managing cash flow. Offsetting these costs can be difficult, but companies are advised to partner with reliable suppliers that are willing to offer discounts for early payments.

Inefficient invoicing and payment 

Cash flow problems plaguing construction firms stem from slow invoicing and payments. Clients don’t always pay on time and some only pay after the job is complete, straining cash flow for long-term building projects. At the same time, construction companies create invoices manually, which is time-consuming and error-prone.

That’s why companies need an automated accounting system that calculates billable hours, capital expenses, and other overhead costs involved in a job. Setting a progress payment schedule and prompt reminders to clients will also reduce late payments at different phases of the project.


Undercapitalisation in construction is a phenomenon wherein companies don’t have the cash required to fund projects and support operations. Being undercapitalised hinders your company’s growth because you can’t afford investments to finish jobs and expand your business.

Eventually, you’ll be forced to finance your business through short-term credit and long-term debt, which is not ideal. Unless you can analyse your cash flow and make sound investment decisions, undercapitalisation may be something you may never recover from.

Inadequate business planning

Poor preparation for growth tends to be the downfall of Australian construction firms. To ensure this never happens, you need a concrete plan that accounts for the financial, operational, and marketing side of business.

First, create a five-year financial forecast so you can plan smarter investments. You should also review your business processes and set measurable targets to increase productivity levels.

Finally, identify your market segment and allocate resources in the right strategies to acquire new clients. This could include social media, email, and find-a-tradie websites.

Health and safety risks

Work-related injuries and fatalities are frequent in an industry as manually intensive as construction. According to Safe Work Australia, 12,600 worker compensation claims come from the construction industry for injuries and diseases annually.

Injuries range from cuts and slips to chronic back pain and debilitating illnesses caused by poor job site conditions. Early 2020 reports also found that there have been seven construction worker deaths since February 27.

Keeping workers safe must be a top priority on every job site. This involves mitigating safety hazards with thorough site inspections, equipment maintenance, and protective gear.

Additionally, ongoing safety training reduces the likelihood of serious incidents and demonstrates your commitment to the well-being of your workers. Make sure to teach tradies the importance of proper lifting technique, regular exercise, sun protection, and a healthy diet.

Ballooning insurance costs

The average contractor may pay huge premiums on insurance plans, but there are ways to reduce costs. If you need public liability, portable equipment coverage, or personal accident insurance, don’t just settle for any insurance plan.

Compare and contrast plans from different insurance providers and find out if there are any discounts available. Finder is a great tool for finding the right insurance plans and getting quotes from leading Australian insurers.

New technology

Emerging technologies like virtual and augmented reality, drones, and smart gadgets have massive implications for the construction industry. They streamline planning phases and alleviate strenuous tasks tradies perform in inaccessible areas and hazardous environments.

The problem is many construction companies are not aware of or underestimate the impact of these technologies. To keep your competitive edge, it’s important that you look into new technology and how it can enhance existing workflows and job sites.

Legacy software systems

Construction companies are notoriously slow at adopting new software. For example, many organisations still rely on spreadsheets to keep track of billable time and outstanding invoices. Meanwhile, construction managers use barebones forms and to-do lists for worker compliance checks.

These systems may have worked well for companies in the past, but they’re far less efficient than job management software like WorkBuddy. With WorkBuddy, you get a wide array of features optimised for construction. This includes job scheduling, operational dashboards, and time tracking features that can export timesheets to your accounting and payroll systems.

More importantly, compliance is already integrated into the WorkBuddy platform. Workers receive safety forms and site surveys relevant to their tasks and can complete those forms and surveys within the app. Managers also get alerts when certain job procedures and safety protocols aren’t met so they can address them quickly.

All these features translate to increased productivity, safer workers, happier clients, and a much healthier bottom line. If these benefits appeal to you, call us or request a free WorkBuddy demo today. We’ll show you how you can overcome some of the toughest challenges in construction with our job management platform.

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