Authors: Chennakeshava Reddy K, Mrs. Roopa Ajwal
Abstract: This paper explores the structural interface between upfront project costing frameworks and downstream working capital management (WCM) dynamics in project-driven engineering Small and Medium Enterprises (SMEs). Engineering SMEs exist within a distinctive cash-cost nexus, in which bespoke, contract-based business models produce highly customized component specifications, and unmetered engineering modifications result in a cascading liquidity deficit that traditional, steady-state corporate finance models cannot capture. The paper is based on a diagnostic mixed-methods research design and analyses primary survey data from n=82 cross-functional operational stakeholders and two years of audited financial statements, ledger accounts and component level Bills of Materials (BOM) extracted from the TallyPrime ERP system of Pixel Controls Pvt. Ltd. in Peenya Industrial Area, Bangalore. Significant data silos between engineering execution teams and financial controllers are revealed by statistical analyses, such as One-Sample $t$-Tests, Ordinary Least Squares (OLS) linear regression models, and descriptive Chi-Square tests. Empirical results show a systemic average project cost overrun of 10.74%, which is caused by unreported scope creep and fluctuating raw material prices (such as those of copper and fiber optics). OLS regression analysis reveals that initial cost estimation realism (beta = – 0.302, p = 0.009$) and absolute structural clarity (beta = -0.285, p = 0.005) are the main drivers of downstream variance minimization, despite One-Sample t-Tests confirming that baseline project pricing structures appear superficially transparent (p > 0.05). In addition, contract ambiguities and slow resolution of administrative queries consume significant working capital and push the company’s Days Sales Outstanding (DSO) to 88 days, slowing the velocity of internal cash flow. To address these structural inefficiencies, the study proposes a scalable strategic roadmap based on transition parameters from reactive bookkeeping to automated milestone-driven milestone triggers and real-time project variance dashboards.
