Cash Flow
Also called: cashflow
What is Cash Flow?
Cash flow is the movement of money into and out of a business over a period. Positive cash flow means more came in than went out — a different question entirely from whether the business was profitable.
Why Cash Flow matters
Businesses fail from running out of cash, not from making losses on paper. Profit pays the owner eventually; cash pays the salaries this Friday.
Cash Flow formula
Net cash flow = Cash inflows − Cash outflows for the period
Operating cash flow excludes loans and capital spending.
How Cash Flow works in practice
Forecast weekly for the next quarter, listing expected collections and committed payments. Even a rough forecast surfaces the tight week early enough to do something about it.
Frequently asked questions
Stock, unpaid invoices, loan repayments and owner drawings all consume cash without reducing profit.