Cash flow
In short. Cash flow is the movement of money into and out of a business over a period. Positive cash flow means more cash arrives than leaves. A business can be profitable on paper and still run out of cash if customers pay late or large costs fall due before income arrives.
Last checked against its sources on 10 October 2026. How we write these.
Profit and cash are different things. Profit is revenue minus costs in an accounting period. Cash flow is when money actually lands and leaves the bank. An invoice you have sent is revenue but not yet cash.
The usual trap is timing. A builder buys materials in January, pays wages weekly and invoices on completion in March. The job is profitable, but for two months the business is paying out more than it takes in.
Most cash problems are predictable. A simple forecast that lists expected receipts and payments week by week for the next three months shows where the low point will fall and how long it lasts, which leaves time to act. Levers include invoicing sooner, agreeing deposits, negotiating supplier terms, and chasing overdue payments.
Late payment is a common cause. When customers take 60 days to pay, the business is effectively lending them money. This is also why concentration matters: one large customer paying late can strain the whole business. Reviewing cash weekly, not annually, is the habit that most reliably prevents surprises.
Questions people ask
Can a profitable business have cash flow problems?
Yes. Profit counts revenue when earned, while cash flow counts when money moves, so growth, late payments or large upfront costs can leave a profitable firm short of cash.
What is the difference between cash flow and a cash flow forecast?
Cash flow is what has happened to money in and out. A forecast is an estimate of future receipts and payments, used to spot shortfalls early.
Sources
- Cash Flow – Corporate Finance Institute checked 10 October 2026