Cash flow is the movement of money into and out of a business over a period of time. Cash is the term used to refer to the amount of money available in a business at a point in time and is required to meet short term financial obligations.

Cash inflow refers to the money entering the business increasing cash reserves. Examples include revenue from cash sales, revenue from credit sales, loans, grants, interest received, sale of assets and other sources of income.

Cash outflow refers to the money leaving the business decreasing cash reserves. Examples include purchase of raw materials, salaries and wages, rent, utilities, loan repayments and capital expenditure.

Why is Cash Flow Important?

Paying day-to-day expenses: Having positive cash means that a business has money available to pay their bills such as rent, utilities, salaries and inventories.

Repaying debts

Growth and expansion

Dealing with unexpected circumstances

Measuring financial performance

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