Cash Flow Analysis of Construction Projects

Construction projects are complex and risky. According to the literature, even profitable construction companies can fail due to poor cash flow. In order to survive in this rapidly changing environment, effective cash flow management is essential. Many unforeseen factors affect a construction project’s cash flow. The objective of the research presented in this paper is to examine the impact of these factors on contractor cash flow during the construction process. A model has been established by integrating analytic hierarchy process (AHP) and simulation to examine the impact of various factors on cash flow. Results show that cash outflow varied approximately from 12.9% to 20.4% with a mean value of 16.7% considering the effects of all factors on the basis of 30% total cost variation. By analyzing the results of the developed model, contractors will recognize which factors contribute the most to contractor cash flow performance. Professional cash flow management (i.e. prediction) might greatly reduce failures in the construction business.