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construction enterprise makes their bid at all costs.
However consideration on project budget, project
cost, and analysis of the recovery doesn't given full
attention. The result is that the construction work
and value go up, but the benefits slip off. Thus, in
the bidding, company should be considered for the
contracting the task, without blindly accept the
requirement of prepayment construction or infinitely
lower prices from the investor's side.
The imbalance between supply and demand of
construction market makes up the direct cause of
default project fund situation. Some investor making
use of the eagerness to contract a project for
construction enterprise, transfer the problem of
shortage on construction funds to construction
companies, forcing a large number of pre-payment
from construction enterprise. Most construction
companies apply extensive management, one-sided
pursuit of economies of scale, thus construction
management level remains at a relatively low level,
and capital management is relatively falling behind.
All these aspect have becoming the bottleneck to
constraint improving competitiveness and efficiency
of Construction enterprise. Construction industry
itself has a decentralized feature, and as more and
more domestic companies have joined the ranks of
international competition, this character has
becoming more and more significant. Across
multiple markets, switching to different Engineering
field in a short time; undergoing production
activities far from headquarters; needing a lot of
construction machinery; adequate liquidity; the
necessary monetary funds, which all determines its
financial management should have huge indifference
from other industry. More attention should be paid
in cash flow management.
3 CONSTRUCTION ENTERPRISE
CASH FLOW MANAGEMENT
OBJECTIVES
Because of construction enterprises falls under great
influence due to market factors, the funding capacity
and ability to resist risk is relatively weak, while
heavy manufacturing, light management, its
accounting capacity is weak, as well as the lack of
internal control, focus on short-term interests, and
lacking of cash flow management. The existence of
these issues of construction enterprises require us to
address through the financial management and
strengthening cash flow management. For the
construction business, the basic objective for cash
flow management is to ensure the funds needed for
general production and operation activity, while
enhancing cash flow and improves operational
efficiency, which eventually allows companies to
grow in the steady strength and expand based on
stable development. Construction enterprise cash
flow management objectives are as follows:
3.1 Actively Raise Cash Flow for
Business Operation
Due to the fact that construction enterprises exists
some of its own particularity, the demand for capital
are centralized and in stabilize, also has shortage of
monetary funds and narrow channels financing fund.
The main source of financing is internal financing
which leads to equity fund becomes a very important
source of liquidity. So for the construction
enterprises, they should gradually increase the
absorption of credit funds by improving operation
management, standardizing financial system,
improving core competitiveness and sustainable
development capacity. They should also adhere to
honesty and trustworthiness, improve
creditworthiness, won the trust and support of banks
and as well broaden the financing channels. When
raise funds, attentions should be paid on ratio of
enterprises own funds and debt capital. It is
necessary to make active use of external funds, and
the use of financial leverage, but also fit with
enterprise's own scale, reduce business risk, and
minimize the cost of funds to the lowest.
3.1.1 Strengthen Operating Management of
Cash Flow, Improving Efficiency of
Funds
The investment of construction companies should be
medium to long term investment projects. The
investment should focus on core competencies
construction projects, reinforcing the foundation,
and avoiding blind diversification. The company
should learn from the experience from some large
enterprises in the development process, identify their
goals, and make rational use of cash flow, so that
they could go through steady development and
strengthening cash flow management. Only when
companies know their own stage of development,
and position the direction of a its business
development, make rational use of resources, while
strengthening cash, accounts receivable and other
construction costs can they gradually increase the
efficient use of funds.
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