Cash flow management by contractors

Abstract

The paper focuses on various cash flow management techniques selected and incorporated by contractors into their daily processes and the effects of poor cash flow management on their business. A quantitative research approach was used using a web-based questionnaire. The questionnaire was distributed to all contractors registered with the Master Builders Association within the Eastern Cape Province. Results revealed that majority of contractors successfully implement cash flow management techniques and are therefore able to meet their monthly obligations. Respondents further agreed that late payments are detrimental in terms of their cash flow causing project delays. Increased capital expenses and higher levels of competition in the construction industry market, force the construction companies to consent to an increased number of risks, effectively ensuring their vulnerability to negative impacts on their cash flow and inevitably exposure to unforeseen events that are innate in any construction project. The study was limited to the Eastern Cape region, therefore reducing the targeted population and number of responses. The study investigated the competency level of financial management by building contractors with reference to the implications caused by poor financial management on the contractual parties involved within a project. The aim of the study was to deduce the extent to which contractors in the Eastern Cape implemented effective cash flow management techniques to sustain their businesses. The study highlighted the link between factors negatively impacting cash flow and its subsequent cause of failing contractors within the construction industry. The paper responds to the conference theme given that the effective cash flow management by contractors within their own firms and pertaining to construction projects, promotes the sustainability of the Built Environment.