Sara Ayman
The American University in Cairo, Egypt
Title: Cash Flow Optimization with minimum Financing Cost in Construction Projects
Biography
Biography: Sara Ayman
Abstract
The contractor’s cash shortage during the progress of a construction project, leads to delays, penalties and may lead to project failure. Since the net difference between the cash inflow and cash outflow during construction, must be financed by the contractor, the contractor must consider methods to improve their cash flow inorder to maximize the profit margin and minimize the financing costs. Several studies have covered optimization of cash flow and optimization of financing costs, separately. This model integrates both studies to come up with the optimum cash flow schedule that covers the lack of cash with maximum profitability. The model proposes different ways to overcome the deficit in cash flow; first by minimizing the amount of financing required through shifting the activities with lag to optimize the cash flow, without extending the project duration, then evaluating different financing alternatives. The outcome of the model is a modified cash flow for the project with less financing required from the contractor, and optimized schedules of financing inflow and outflow based on the best financing alternative, that covers the lack of cash with the minimum financing cost. Finally, the model studies and evaluates another solution through considering a negotiable bid by increasing the advance payment and decreasing the profit margin. The model has been tested and sensitivity analysis has been performed.