Attributes and impact of advance payment system on cash flow, project and organisational performance
Journal of Financial Management of Property and Construction
ISSN: 1366-4387
Article publication date: 23 November 2021
Issue publication date: 21 September 2022
Abstract
Purpose
Construction companies require meticulous and thorough financial planning to ensure business survival in an increasingly competitive global market. Past studies assert that cash flow management is also crucial to meeting project and organisational performance expectations. However, the link between an advance payment system (APS), cash flow and project performance has hitherto received scant academic attention. Therefore, this study aims to investigate the attributes and impact of APS on cash flow, project and organisational performance. This study surveyed all registered contractors listed in Grades 1–9 on the Construction Industry Development Board Register of Contractors in South Africa.
Design/methodology/approach
This study adopted an empirical epistemological design and deductive reasoning to analyse primary data collated via a questionnaire data collection instrument. Summary statistical and regression analysis were used to explore data garnered.
Findings
This study found that key significant attributes of APS in South Africa were payment of balance to the contractor upon project delivery; advance payment to contractors before the commencement of the work; and payment to contractors as agreed. This study proffers that project performance in terms of cost, time and quality performance is highly and positively supported by APS. Moreover, APS positively supports the efficiency, competitiveness and profitability of construction organisations. Cumulatively, these findings confirm that APS attributes in South Africa conforms to the global attributes of APS. The research concludes that client use of APS on projects improves the likelihood of attaining improved quality and time performance. This paper concludes with a recommendation that both public and private clients consider the option of an APS as the ideal payment system to support project and organisational performance.
Originality/value
To the best of the authors’ knowledge, this work constitutes the first attempt to explore the linkages between an APS, cash flow and project performance in South Africa and seeks to engender wider polemic debate and further discussion among industry stakeholders.
Keywords
Acknowledgements
The financial assistance of the National Research Foundation (NRF) (Grant Number: 105301) and Tetfund towards this research is hereby acknowledged. Opinions expressed, and conclusions arrived at, are those of the authors and are not necessarily to be attributed to the NRF and Tetfund.
Citation
Omopariola, E.D., Windapo, A.O., Edwards, D.J. and Chileshe, N. (2022), "Attributes and impact of advance payment system on cash flow, project and organisational performance", Journal of Financial Management of Property and Construction, Vol. 27 No. 3, pp. 306-322. https://doi.org/10.1108/JFMPC-03-2021-0022
Publisher
:Emerald Publishing Limited
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