Development of a company-level dynamic cash flow forecasting model

Current methods of predicting cash flow have a number of significant weaknesses. At the project level, previous models are simple and incorporate only some of the variables affecting cash flow. On the company level, budgeting is performed on an overall basis (i.e. no account is taken of individual contracts). This is mainly due to the fact that a considerable amount of any year's turnover is contributed by contracts that have yet to be won (or even known of) at the time of the budget. This approach, in addition to being inaccurate, precludes the role of budgeting as a tool for strategy evaluation. This paper presents a dynamic cash flow forecasting model that would assist contractors to effectively plan and manage the cash flow of individual projects and at a company level. The advances made in the model can be represented by three of its main features. First, the development of a more accurate and complex cash flow calculation mechanism. Second, the development of an information system that will help the contractor enter the data necessary for this mechanism. Third, the development of a company-level model that is based on individual projects, both known and unknown to the contractor at the time of the forecast.