Cash flow

Actual movement of money in and out of the business.

Definition

Cash flow tracks money actually received and paid, distinct from revenue and expenses recognised under accrual accounting. It is split into operating, investing and financing activities.

Why it matters

Profitable businesses fail from cash flow, not from losses. A company can report a strong margin and still be unable to make payroll if customers pay in ninety days and suppliers demand thirty.

Related terms

• working capital
• burn rate
• accrual accounting