Glossary
Cash flow
The difference between monetary inflows and outflows in a period. It measures the company's actual liquidity, not revenue.
What is cash flow
Cash flow is the difference between the company's monetary inflows and outflows over a given period. Unlike revenue or accounting profit, cash flow measures the money that actually enters and leaves the bank account.
A company can show a profit on paper and still run out of cash — for example, if clients pay at 90-120 days while suppliers must be paid at 30.
Why it matters
- Pays salaries, suppliers, and taxes: without cash, even a profitable company can face a crisis
- Anticipates problems: monitoring cash flow 30-60 days ahead lets you spot gaps before they happen
- Supports decisions: an investment only makes sense if the cash position supports it
How to calculate it (simplified)
Cash flow for the period = Actual collections – Actual payments
For a 30-day forecast:
Current balance + Expected collections (invoices due) – Expected payments (suppliers, salaries, taxes, installments)
You don't need cent-level precision: a reasonable estimate updated weekly is more useful than an exact calculation done once a year.
The link to revenue
A common mistake is confusing revenue with cash. Revenue can grow while cash drains — for example, if new clients pay on extended terms or if margins shrink.
The 30-day cash balance is one of the 5 numbers to check every week to keep the business under control.
Learn more: 5 numbers to check every week | Break-even point