Cash budget as a planning tool towards projects completion by construction firms in the Northern suburbs industrial areas of Cape Town

Abstract

This study sought to ascertain the extent to which construction firms in the Cape Town Northern Suburb industrial areas use cash budgets when planning their project completion. More precisely, the study aimed to determine the types of budgets used by construction firms, the purpose for which types of budgets are used by construction firms, the perception of the construction firm regarding the awareness and usage of these types of budgets, and whether these types of budgets are outsourced or internally prepared. The study was motivated by a dearth of research on the usage of cash budgets by construction firms, the high rate of failure of South African construction firms and the poor performance, which then reflects high levels of non-completion and low productivity on projects. Data was collected by means of a questionnaire survey that consisted of closed-ended questions. The findings of the study reveal that most of the sampled construction firms frequently prepare and use budgeted income statements and cash budgets. Furthermore, the findings also suggest that the sampled construction firms used different types of budgets, mostly for the purposes of allocating resources and forecasting the cost fluctuation on their businesses. Concerning the perception and the awareness of the types of budgets, the findings revealed that the investigated construction firms were perceived to be mostly aware of budgeted income statements and cash budgets. Regarding the preparation and outsourcing of cash budgets, the findings indicate that cash budgets were mostly prepared on a monthly and yearly basis. In addition, the results also suggest that most construction firms outsourced cash budgets. The findings may further assist construction firms in gauging and reviewing their usage of cash budgets and the purposes for which they use them with a view to optimise the benefits derived from these findings, as well as overcoming the factors that inhibit them from using these tools in the first place.