Abstract
Cash-flow management is very important for contractors given that inadequate cash resources typically are the main causes for bankruptcy of construction companies. In comparison to most other industries, the construction industry is severely plagued by risk, and the success of construction projects usually depends on valuating all risks. However, conventional methods suggested by extant research on cash flow forecasting do not consider comprehensive identification of risk factors, interactions between the factors, and simultaneous occurrences of the factors. This study introduced a simple and appropriate probabilistic cash flow forecasting model using Bayesian Belief Networks (BBNs) to avoid bankruptcy of contractors by considering influence diagrams and risk factors that affect a project. Workability and reliability of the proposed approach was tested on an important building construction project in Iran as a real case study, and the results indicated that the model performed well.
Highlights
The importance of and need for cash-flow management is a matter of consensus among researchers and practitioners (Navon 1996)
Cash flow forecasting helps contractors to select the contracts that can be financed by the available resources and can be beneficial to make provisions during difficult periods to avoid a liquidity crisis
The construction industry is debatably the industry that is most plagued by risk, and the success of construction projects usually depends on the consideration of all risks involved
Summary
The importance of and need for cash-flow management is a matter of consensus among researchers and practitioners (Navon 1996). With respect to a contractor, cash flow consists of a schedule of income and payments throughout a construction project (Son et al 2006). An accurate cash flow forecasting profile and understanding of the risk factors affecting the profile are very essential elements in each project (Hwee, Tiong 2002). The project consisted of five continuous blocks with the following facilities: hotels, restaurants, a sports complex, a fountain entrance, commercial shops, a kindergarten, a mosque, and a health clinic. This project was implemented to provide complete services to all the companies in the Technology Park that included knowledge-based companies and elite firms across the country. The start date of the project was 6 July, 2014
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