What Is Cash Flow?

Financial Term

Your business or personal cash flow is a measure over time of how money comes in and goes out.

A useful visual cash flow metaphor is a bucket with water going in the top, but also having a few holes in the bottom. For business cash flow, the water going into the bucket at the top is mostly payments from customer generated revenue. And the water going out the bottom holes is various expenses.

cash flow

Using this visual metaphor, the goal of positive cash flow simply means that the water level is rising because more is going in the top over time than is going out the bottom over time.

Cash Flow not Cashflow

Sometimes people spell it as one word, “cashflow,” but you shouldn’t spell it that way when talking to accountants, bankers or investors!

For all of those financial types, the Cash Flow Statement is extremely important. It is one of three fundamental accounting reports. And it’s very often left out of information shared by entrepreneurs. Don’t make that mistake either!

Don Gooding

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