Specifics for Construction Industry

In construction industry, when compared to production industry possessing land and buildings at its worksites, these (land and buildings at worksites) are generally on lease or rent from owners. The industry also moves over from site to site quite unlike the manufacturing industry where the product moves and the facility is stationarily located.Further, equipment in construction industry depreciates much faster than in location-specific industries. Pre-paid expenditure take long to recover or adjust and may often turn to bad debts. Inventory lies subject to vagaries of weather and could get damaged and hence, wasted. Retentions and EMD are essentially book debts, though technically part of them may be preliminary expenses. Social security continues to demand more and more out of the earnings. Outstanding expenses do not seem to be perceptibly reducible. Payments for adopting or purchasing patents and consultancy advices are generally high and also subject to uncertain attitudes of owners. Reflecting on the example in Section 19.6, with these typical factors in mind, it is inescapable that a high rigour of financial management is fundamental to the success of construction industry, depends as it does on the practice of contracting out.