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Research

29 ABR. 2018

Financial management practices of general contractors

Financial management (FM) of general contractors (GCs) occurs at both project and organisation level. This study was conducted among GCs to: investigate the financial practices of GCs; determine what causes poor profitability, cash flow problems, difficulty in securing work, insolvency, and financial failure.

The findings include: GCs identify the importance of FM at organisation and project level within their organisations; poor profitability and cash flow problems are attributable to poor FM; the difficulty in securing work is attributable to overtraded markets, down turn periods within the economy, and poor FM; insolvency is caused by poor profitability, cash flow problems, and poor FM, and financial failure is caused by a GC not maximising profitability, and solvency as a result of poor FM. FM, profitability, and solvency are critical aspects in contributing to the success of a GC. It is essential for FM to encompass all organisation functions and activities.

Recommendations include that all levels of management in a GC should be made aware of the importance of FM at organisation and project level, and maximum profitability to a GC, how they can contribute to the GC achieving maximum profitability, and educated with respect to the importance of positive cash flow and solvency.