An assessment of risk factors involved in modelling cash flow forecasting

Many models have been developed to assist contractors and clients in their cash flow forecasting. The majority of these have been based on standard cash flow S-curves, developed using the traditional manual approach, mathematical and statistical models. Many of these models failed to consider and analyse the factors responsible for the considerable variations in the modelled cash flow profiles. This study as a first step in a knowledge-based expert system (KBES) modelling of construction cash flow to incorporate risk and uncertainties, identified and assessed the risk factors responsible for the variation in construction cash flow profiles. The study was conducted through a questionnaire survey administered on contracting organisations. Analyses were carried out using mean response and univariate analysis of variance (ANOVA). Results showed that the major risk factors involved in cash flow forecasting relate to changes in the design or specifications, contract conditions pertaining to cash in flow, interim valuations and certificates and construction programming issues such as inclement weather. Results also indicated that cash flow forecasting modelling that incorporates risk would need to consider categorisation along the groupings of firm size, procurement methods and construction duration.