Working capital management in a manufacturing construction company : a case study

Abstract

The dissertation was conducted with the aim of evaluating, analysing and focuses on improvements which can be implemented at Attard Brothers Group of Companies to address the shortcomings present within the Group's system for managing inventories, accounts receivable and payable and cash. The Group was founded in 1977 and has since become one of the main players in the local construction industry. Of equal importance in working capital management principles lies the Group's operating cycle, which traces the progression of cash. The Group is currently experiencing setbacks due to liquidity problems, which are also experienced by the manufacturing and construction industries, which the Group services. This relates to the fact that the main Group debtors, hailing from the construction industry themselves, arc delaying payments. Although their financial position is considered to be good, they lack the necessary liquidity to effect payment within the stipulated credit period. Consequently, it has become normal practice for these debtors to delay payment until the project on which they are working is complete. Then, rather than effecting payment in cash, they enter into bartering agreements with the Group and balances due are offset against the transfer of property. This is, in tum, is leading the Group to taking longer to complete the cash conversion cycle and ending up with a significant amount of property with stocks which may have a negative effect on other areas of the business.