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Financial Planning and Management Practices of Electrical Contractors

Author

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  • Lucko Gunnar

    (Department of Civil Engineering, Catholic University of America, Washington, DC 20064, United States of America)

Abstract

Contractors must carefully manage their cash outflows (e.g., for materials to enable their work) and inflows (after the work) to be profitable, particularly in an economy that is still recovering from the 2008-2012 recession that grew out of the mortgage crisis. Their importance for business success is undisputed, as bankruptcies due to insufficient cash flow underline. Therefore, this study investigated current business practices of electrical contracting companies of different sizes with respect to their financial planning and management. A detailed questionnaire was developed with best guidelines on survey studies and pilot testing. It was sent to members of the National Electrical Contractors Association. Respondent anonymity was ensured. The survey recorded demographics, business practices, operating conditions, and other important factors using 57 subquestions. Each section allowed feedback to clarify the numerical responses. Responses were well distributed across company sizes, so that the results are representative for the entire industry. The results indicated that contractors generally have a substantial amount of experience in financial decision making. Their approach is conservative and focuses on healthy growth. Yet, opportunities to fine-tune business practices are identified, e.g., immediate invoicing, considering discounts to accelerate payment receipts, attempting to negotiate and use favorable credit terms, reviewing payment performance, and performing frequent cash flow forecasts. Some of the differences in the responses can be attributed to different company sizes. To help especially smaller companies in planning their cash flow, a spreadsheet for implementation has been created.

Suggested Citation

  • Lucko Gunnar, 2016. "Financial Planning and Management Practices of Electrical Contractors," Organization, Technology and Management in Construction, Sciendo, vol. 8(1), pages 1482-1498, December.
    • Handle: RePEc:vrs:otamic:v:8:y:2016:i:1:p:1482-1498:n:11
    DOI: 10.1515/otmcj-2016-0011
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    References listed on IDEAS

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    1. Qingbin Cui & Makarand Hastak & Daniel Halpin, 2010. "Systems analysis of project cash flow management strategies," Construction Management and Economics, Taylor & Francis Journals, vol. 28(4), pages 361-376.
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