Question

Explain in detail why construction financial management is different than financial management in most other types of businesses.

Answer 1

Financial Management is the utilization of company's financial resources. How you use your resources impacts company's future.

The construction company's management is different from other than financial management in most other types of businesses because of unique challenges and problems faced by them.

Differences between them are as follows :-

1. Project Oriented

The work in other companies is process oriented whereas in construction companies it is project oriented. Construction companies work on similar products but their products are always unique due to site locations which affects availability of labour and materials.

2. Decentralized Production

Other businesses perform their task at centralized location. Employees come to same location year after year. While construction companies performs its work at number of decentralized location ,which affects cost of product produced.

3. Payment Terms

Projects of construction company's are generally based on long-term contracts. Monthly progress payments are made by owner whose project is being built while in other businesses seller draws bill at the time of order or when the product is delivered.

4. Subcontractors

Construction companies depends heavily on subcontractors while other ventures do not hire out their work (if they do ,then only to one subcontractor ). This activity of hiring subcontractors help construction company's to tap subcontractor's financial resources which impacts their allocation resources alot.