Cash flow basics for small businesses
What cash flow is, why it differs from profit, and how to keep it healthy.
Direct answer
Cash flow is the actual movement of money in and out of your business over time. A business can be profitable on paper but still run out of cash if money comes in slower than it goes out. Tracking cash flow is about timing, not just totals.
Simple explanation
Profit and cash are not the same thing. You can invoice a client today (revenue) but not get paid for 30 days (cash). Meanwhile, rent and payroll are due now. Cash flow tracks when money actually moves so you don't get caught short.
How to keep cash flow healthy
- 1
Forecast monthly inflows and outflows
List expected income and expenses for the next 1–6 months. A simple spreadsheet works.
- 2
Get paid faster
Invoice the day work is delivered. Set clear payment terms. Send polite reminders before due dates.
- 3
Slow down outflows where possible
Negotiate net-30 terms with suppliers. Pay bills on (not before) their due date.
- 4
Hold a small cash buffer
Even one month of operating expenses in a separate account smooths out timing surprises.
- 5
Review weekly
A 5-minute weekly cash check is enough to catch problems before they become emergencies.
Summary
- •Cash flow = timing of money in vs. money out.
- •Profitable businesses still fail when cash runs out.
- •Invoice fast, collect on terms, hold a small buffer.
- •A 5-minute weekly check is enough for most small businesses.