Dynamic cash flow forecasting model for construction contractors

The problem often facing construction companies is bankruptcy. This is often due to the lack of financial control, and in particular the lack of a cash flow forecasting system. Recently contractors have started using cash flow forecasting techniques based on research. This research has been based on Standard Value or Cost curves. A recent model developed by Kaka (1994) uses a library of standard s-curves to forecast the cash flow at both project level and company level. This model has been proved to be an accurate management tool. However, the model has several problems. The model does not incorporate the actual data from current projects. It is not capable of generating the value of work in progress. It does not take any account of risk. It assumed that contracts could be categorised into small groups. Only a few of the variables related to the tendering strategies. A new dynamic model has been developed to address these inadequacies and further improve the efficiency of cash flow forecasting at the project and company level. The development of the dynamic model has been aided by a collaborating UK contractor, who has supplied historical information. The new model uses a unique information retrieval system to store and supply up to date information to the project and company level models. The project level model uses the information stored to aid the analyst in using information that may be unavailable at the pretender stage. The project level model also incorporates an ideographic approach to the production of the standard S-curve. The Company level model uses the unique information system to supply information, specifically characteristics to simulate unknown projects that the company expects to complete. The model uses a unique database retrieval system (OBRS) to retrieve information. The system is based upon the ability to classify project. A research survey was undertaken to investigate how the construction industry classifies projects and classification they feel to be the most important. This information was then used to develop and test the unique OBRS, which is an important part of the model. The model uses two different storage techniques, the first and most important technique stored the completed project information. The second technique stores the current project information for the company level model. A risk survey was also carried out to address the lack of risk in the original model. The model has been further developed to incorporate the information gained from the survey. The model has been tested and evaluated in order to determine how the developments have improved its accuracy. The testing of the project model indicated that the model can improve the accuracy of the forecast as the project progresses. The validation also indicated that the model is able to store and retrieve information using the OBRS system accurately. The Company level is able to forecast cash flow and can be used as a simulation tool to aid Construction companies' business decisions and planning.