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Forecasting construction materials suppliers' financial turnover

Forecasting construction materials suppliers' financial turnover 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 multivariatediscriminant analysis MDA is used. Predictive accuracy of the models is tested on an independent, holdout sample of 10 suppliers' characteristics. It is found that risktaking suppliers who protect themselves from bad debt by using insurance suppliers who employ a thirdparty 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Engineering, Construction and Architectural Management Emerald Publishing

Forecasting construction materials suppliers' financial turnover

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
0969-9988
DOI
10.1108/eb021147
Publisher site
See Article on Publisher Site

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 multivariatediscriminant analysis MDA is used. Predictive accuracy of the models is tested on an independent, holdout sample of 10 suppliers' characteristics. It is found that risktaking suppliers who protect themselves from bad debt by using insurance suppliers who employ a thirdparty 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.

Journal

Engineering, Construction and Architectural ManagementEmerald Publishing

Published: Mar 1, 2000

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