CASH MANAGEMENT IN THE CONSTRUCTION SECTOR A CASE STUDY ON DEFENCE CONSTRUCTION ENTERPRISE

Abstract

Cash is one of the most important resources of a construction company which determines the survival of a company. Given the management expertise and experience that is available to the construction industry, it seems strange that, according to the literature, the major causes of failure are lack of financial control and poor management. The purpose of this paper is to assess the practice of cash flow management in Defense Construction Enterprise. It focuses on the planning and controlling of cash flow management in construction sector and factors affecting project cash flow. The research approaches use both qualitative and quantitative methods. Questionnaires were distributed to forty projects management team during the enterprise quarter meeting in Addis Ababa and ten head office higher officials. In addition, an interview was prepared, based on the analysis of the questionnaire, to get recommendation of practitioners for a remedial measure. From the result of the questionnaire, the cash flow planning is done both at project and head office level. Yet many factors hinder the efficient management in which delay in material delivery, overdue payment from client and delayed project schedule was found to be the contributor to the enterprise cash flow difficulties. The result also showed that time overrun to be the significant effect of poor cash flow management followed by claim and cost overrun consecutively. From the evidence cash flow problems are the causes of failure, even when they are known, do not appear to be taken seriously. They must be if a company is to survive. The enterprise should also exhaustively work on cash planning both at projects and head office. In this way projects can proactively manage the negative effect of all the factors which can affect their cash flow. Existing developments and methods in cash flow forecasting and modelling can serve as a starting point for managers to rethink their cash flow management.