A key challenge for property fund managers and their development partners is that, even with best-practice financial checks and project monitoring processes, they have no way of confirming how much (if any) of each progress payment has been distributed to the subcontractors and suppliers that formed part of the claim.
This ‘blind spot’ is of particular concern given widespread builder liquidity issues and the subsequent insolvency risk.
Industry-leading funds management and development firm WINIM has turned to technology for a solution, adopting the IPEX payment platform to limit investor exposure to this risk.
Peitra Creak, WINIM’s project director explains, “We’ve always placed great emphasis on scrutinising builder financials and checking claims against work performed onsite but, traditionally, once you made a progress payment to the builder, you’ve had zero visibility or control over how those funds were deployed.
“You just had to accept the builders’ ‘stat dec’ at face value and make your next payment.
“As soon as it became clear that IPEX could provide us with payment oversight and even more importantly, remove the ability for a builder to use our funds to cashflow their other projects, we didn’t hesitate to adopt the platform.”
Each progress payment made by WINIM is ring-fenced to that specific project.
Builders can access their prelims/margin and direct costs but can’t access the balance of the funds (the portion claimed on behalf of subcontractors and suppliers) for any reason other than to pay those linked to the claim.
WINIM is provided with high-level visibility on payments made from the project account, allowing them to validate (or invalidate) the builders’ statutory declaration each month.
“There’s essentially no change in process for us or our builder but the risk reduction is significant—we can now confirm that payments to subcontractors and suppliers line up with the QS assessment. If someone linked to the previous claim hasn’t been paid, it’s identified immediately and gets resolved before we approve the next claim.
“In theory, IPEX limits our risk at any given time to a single progress payment, but it’s even more secure than that. Whilst payment transparency alone tends to promote good behaviour, it’s the system guardrails to prevent movement of funds into other projects that is the real game changer.
“Even if our builder was to run into cashflow trouble or enter administration, subcontractor payment status is always clear and current, providing a clear line in the sand regarding cost to complete.”
WINIM’s use of IPEX not only helps to confirm that they’re partnering with financially sound builders, payment protection is also helping to attract the best subcontractors, supporting delivery of premium products.
“Acceptance of IPEX proves that our builder partners are confident in their own cashflow position, demonstrating that they have no intent on using progress payments to cashflow other developments. Their use of IPEX also helps us to create a healthier payment model for the contractor; the fact that supplier payments are controlled and visible to us means they can often claim deposit monies earlier.
“We have multiple projects commencing in 2025 that will be built under IPEX. We really see this commitment from our contractors as essential to providing us and our investors with the level of comfort required to enter into a build contract.
It was also clear that protecting subcontractor payments helped to attract the best trades to WINIM projects and WINIM sites were being prioritised over others where getting paid might sometimes be an issue, Creak said.
“We believe that initiatives like the adoption of IPEX and our rollout of Latent Defects Insurance will help us to exceed customer expectations and create spaces they’ll love to live in.
“Of course, we’re also applying what we’ve learnt through this process to the benefit of our advisory clients. Whether it’s our project or not, we’re committed to removing unnecessary risks and achieving the best possible outcome for all involved.
“We see the adoption of IPEX as an important industry change, one that provides benefit to all stakeholders, from developers, subcontractors, financiers, the contractor and, ultimately, purchasers.”
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WINIM Funds Management offers a diverse range of services including property development, construction, project management, advisory and funds management. For more information on any of these services, contact info@winim.com.au
IPEX combines legal protections with practical controls to 'ring-fence' funds to a specific project. IPEX shields projects from unforeseen builder cashflow issues, reducing the risk and impact of builder insolvency. For more information, visit https://ipex.com.au/ or get in touch
