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Accounting Terms
Cash Flow
Definition
The movement of money into and out of a business over a period of time.
Overview
Cash flow tracks when money is received and spent. Positive cash flow means more money coming in than going out. Managing cash flow is crucial for business survival.
Example
Monthly cash flow: $20,000 received from clients, $15,000 paid in expenses = $5,000 positive cash flow.
Best Practices
Monitor cash flow regularly, maintain reserves, and time payments and collections strategically.
Common Mistakes to Avoid
Confusing profit with cash flow
Not forecasting
Poor timing of expenses
Frequently Asked Questions
Can a profitable business have cash flow problems?
Yes—if clients pay slowly or expenses are due before revenue arrives.