Cash flow management techniques practices of local firms in Nigeria

Abstract

This article assessed the perceptions of local construction firms (LCFs) on cash flow management techniques (CFMT) practices with the aim of drawing out relevant inferences that will improve firms’ cash flow. About 59 LCFs were surveyed out of which 31 firms’ questionnaires were fit for analysis. The questionnaire for this study elicited general information about the respondents, their firms and how regular they practice six identified CFMT measured on a five point Likert scale. The result showed that all LCFs are categorised as micro and small business enterprises. All the mean scores were below the midpoint score of 3.00 but greater than 2.00 which indicate a generally fairly practice of CFMT. Most LCFs practiced reduction of profit margin in order to win contracts and CFMT of trade credit (TC) supplies of materials are more frequently practiced than the supplies of labour, and hiring of plants and equipments. LCFs should maximize working capital by assigning profit markup on the criteria of the balance use of cost item base and front-loaded profit markup distribution in presenting a fair bid that will be ethically acceptable. LCFs can also maximize the use of TC supply to achieve highly liquid firms.