Cash Flow Management in the Construction Industry of Pakistan

Abstract

Cash flow management is an important field of construction industry and has gained more importance internationally due to the latest researches carried out on large scale. In Pakistan, however, it is relatively a new field which requires more attention to get benefit out of it. The construction projects in Pakistan are facing a number of cash flow problems which are having negative effects on the project objects like time, cost and quality etc. This study is based on the findings of a questionnaire base survey on cash flow management in construction industry of Pakistan while reporting the significance of different factors, their ultimate responsibility and the effectiveness of some ways of improving cash flow management. A brief literature review was conducted to enlist different factors affecting cash flow management in the construction industry of Pakistan, after enlisting different factors a detailed discussion was conducted with industry experts to find out the relevance of enlisted factors in the construction industry of Pakistan. A list was concluded with 40 factors, upon which questionnaire based research was conducted. Similar process was used to finalize 10 ways to improve cash flow management. A questionnaire was made enlisting all forty factors which can affect cash flow management, parties responsible for each factor and ways of improving cash flow management. Likert scale methodology was used in preparing the questionnaire. The questionnaire was floated amongst industry experts in Pakistan focusing different sectors such as building, roads, bridges etc. After getting sufficient responses, analysis was conducted to find out the results. It was found that the factor which most affects the cash flow management and causes problem was improper cash flow planning in the initial stage of the project for which the contractors are mostly responsible. It was found that constant monitoring of cash flow throughout the construction process can efficiently improve cash flow management and decrease cash flow problems during the construction process. This study also concluded that for better cash flow management, invoicing should be done well in time along with proper documentation. It was also found that to avoid cash flow problems a brief review of construction document should be made and tendering should be done with accurate information. Finally recommendations were made at the end of the study to further explore the horizon of cash flow management in the construction industry of Pakistan.