More control and less work. Even in your industry.
Fast and secure invoice processing for every organization.
Fast and secure invoice processing for every organization
Cash flow shows how much money actually moves in and out of your business during a given period. For entrepreneurs, this is crucial: a company can show a profit but still run into problems if there is not enough cash available to pay bills.
In this article, we explain the exact cash flow definition, what the differences are compared to profit, and which types of cash flow exist.
Table of contents:
The meaning of cash flow is simple: the difference between your income and expenses over a certain period. It shows how much liquidity is available to meet obligations, make investments, or pay off debt. In other words, it is the net movement of cash in and out of your business.
Cash flow is essential for the financial health of any business. There is a difference between positive and negative cash flow.
A clear understanding of cash flow prevents surprises and keeps you in control of your financial situation.
Cash flow and profit are often confused. Yet there is a clear distinction:
Example: you send an invoice of € 10,000 to a customer. On paper, you register revenue and profit. But until the client pays, that amount is not part of your cash flow. This example illustrates why cash flow is often a more reliable signal of the financial health of a business.
In practice, we distinguish three types of cash flow:
Together, these three types provide a complete picture of your financial position.
Suppose you receive $ 25,000 from customers this month and pay € 18,000 in costs and salaries. Your cash flow is € 7,000. This is a positive result, meaning your business retains money to invest, save, or repay debts.
Want to know how to apply this in your own business? In our detailed article, we explain step by step how to calculate cash flow and which formulas to use.
Article: Cash flow calculation
With Payt, you always have insight into your financial position. Our software automates accounts receivable management, helping invoices get paid faster and improving your cash flow structure.
Curious what Payt can do for your business? Download our brochure or schedule a demo today.
By ensuring invoices are paid faster, controlling fixed costs, and keeping strict follow-up with customers.
A healthy cash flow means that more money consistently comes in than goes out, leaving room for investments and covering unexpected expenses.
Cash flow refers to money flowing in and out during a period, while liquidity is about how much cash is immediately available.
Many businesses do this monthly, but for companies with tight margins or many transactions, weekly calculation can be useful.
Yes, for example when you temporarily receive large amounts of money (such as a loan), while still operating at a loss. This shows what a positive cash flow is in practice.
