Nicholas, J; Holt, G D and Mihsein, M (2000) Forecasting construction materials suppliers' financial turnover. Engineering, Construction and Architectural Management, 7(3), pp. 221-231. ISSN 0969-9988
Abstract
Through the credit they furnish, materials suppliers provide a form of working capital for most construction contractors. This paper considers the implications of this for crediting organizations (i.e. suppliers). It is shown that a supplier's financial turnover movement (or lack of it) can be modelled and predicted with some accuracy by considering a number of characteristics of their credit control department. The models are developed from analysis of data obtained from a survey of 55 UK materials suppliers' credit control and debt collection procedures. The statistical technique of multivariate-discriminant analysis (MDA) is used. Predictive accuracy of the models is tested on an independent, hold-out sample of 10 suppliers' characteristics. It is found that risk-taking' suppliers who protect themselves from bad debt by using insurance; suppliers who employ a third-party organization to evaluate potential debtors' creditworthiness; and suppliers who service only one construction trade with materials, achieve significantly greater financial growth than those suppliers who do not exhibit these characteristics.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | contractors; credit; discriminant analysis; financial turnover; risk; suppliers |
| Index terms: | insurance, construction material, discriminant analysis, forecasting, construction contractor, survey, accuracy, turnover, risk taking, movement |
| Subjects: | economic analysis, prediction and forecasting, business management, building materials, practitioner, health behaviours and lifestyles, data collection methods, statistical analysis, professional development, decision-making and reasoning |
| Topics: | Engineering Principles, Information Management, Research Practice, Business Strategy, Roles and Professions |
| Descriptive scope: | 4 PCEA |
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