What is Cash Flow?
The actual timing of money entering and leaving your account — which is not the same as whether you're profitable.
Cash flow is the movement of real money in and out of your business, in the order it actually happens. Profit is an accounting result over a period; cash flow is whether there is money in the account on the day rent is due. 'Positive cash flow' means more is coming in than going out. 'Negative cash flow' means the clock is ticking.
The two come apart constantly. Invoice a client $30,000 on net-60 terms and you have booked $30,000 of revenue and possibly a healthy profit, while having none of it for two months. Meanwhile suppliers, payroll, and rent do not accept a profitable income statement as payment.
This is why profitable businesses fail. The startup graveyard is full of companies that ran out of cash while being technically successful — a genuinely strange way to die, and a very common one. Watch the calendar, not just the total.
Related terms
Definitions from the Business Dog Glossary — educational, occasionally satirical, never financial advice.