The construction and trades industry is known for its high bankruptcy rate, with the sector accounting for as much as 27% of all bankruptcies in Q1 2024. This is driven by a combination of economic fluctuations, seasonal demand, and high upfront costs for materials and labor.
A key factor in this context is the customer’s ability to pay. If a customer fails to pay for completed work, it can place the contractor in a serious financial situation. Small and medium-sized businesses in particular are highly vulnerable to bankruptcy.
Many contractors rely on a limited number of customers of significant size. If one of these customers defaults on payment, it can threaten the entire business.
Large projects also require substantial upfront investments, further increasing financial risk. At the same time, margins in the industry are often low, meaning even small losses can have major consequences. When a customer fails to pay for completed work, the contractor is left covering these costs without corresponding revenue.
To avoid financial pitfalls caused by unpaid invoices, it is crucial for contractors to maintain control over their customers’ ability to pay. Credit assessments conducted before project start and throughout the project are an effective way to reduce the risk of non-payment.
A credit assessment provides insight into the customer’s financial situation, payment history, and overall creditworthiness.
Drifti is a leading provider of digital project management systems for the construction industry. Their customers invoice more than NOK 4.1 billion through the platform. To ensure end-customer payment ability, they offer credit assessment as a service.
"It is a tough market with high bankruptcy rates and low activity. At Drifti, we aim to help more contractors succeed through digitalization, efficiency, and better insights. That’s why it is important for us to offer credit checks to reduce the risk of our customers not getting paid for the work they do."
— Eyolf Strømme-Svendsen, CPO at Drifti
By conducting a thorough credit check before entering into a contract, contractors can assess whether a customer has both the ability and willingness to pay. This enables them to take necessary measures, such as requiring upfront payment, securing bank guarantees, or choosing not to engage with high-risk customers.
During the project, regular credit checks can provide alerts on changes in the customer’s financial situation, allowing contractors to act in time.
