What is cash flow?
Simply put, cash flow is the amount of money that is received from sales, minus the money that is spent to keep the company operating.
Cash flow is positive if the money you’ve received is greater than payments yo’ve made; or negative if your payments are greater than your receipts. Money is received through cash sales and receipts from debtors. Money is paid out for the purchase of raw materials, payments to creditors, and paying salaries.
There is a fundamental difference between cash flow and net profit. Net profit is the bottom line of the profit and loss account. Cash is the amount of money the business has at its disposal to generate further business, known as business liquidity.
Next : the benefits of positive cash flow.
For information about how we can help you with managing your cash flow, go to our cash flow section or contact us on info@mgarnerconsulting.co.uk or ring us on 0800 242 5287.