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What is cash flow?

Cash Flow is your Cash Payments - less - your Cash Receipts.

It's important not to confuse your profits with your Cash Flow. Your customers may pay you now for a product (or service), but your business expenses to produce that product might be paid over time (if financed).

This means you need to look closely at the timing and classification of your Cash Flow in order to understand and create a sound Cash Flow Planning system for your business.

There are 3 Main Classifications on a Cash Flow statement:


  1. Operation Activities

  2. Investing Activities

  3. Financing Activities


Your businesses Cash Flow should be monitored daily in either a hard copy journal, spreadsheet, or accounting software. There are several types of accounting software to choose from. Several software programs have industry specific programs that will help you monitor all the details even more.

Personal Budgeting also uses Cash Flow principles. Understanding your personal Cash Flow allows you to plan and save for education, retirement, and unexpected "rainy day" expenses. The use of a Cash Flow Journal, Software, or even a simple spreadsheet can help you understand and then develop a Cash Flow Planning system for your personal financing.

In business the world, Cash Flow might also be called a Proforma. When requesting financing, banks will request a Proforma or Statement of Cash Flow, to see the health of your business and determine if your business is a good credit risk.

Contact Vidussi Makara Group

for a business analysis of your cash flow.

This information is based on facts, assumptions and representations as stated and authorities that are subject to change.  We will not update this information for subsequent legislative or administrative changes of future judicial interpretations.

LEGAL NOTICE AND DISCLAIMER:  The information within this web site is for informational and educational purposes only and is not tax advice and should not be used as such.  The facts of each individual situation can have significantly different outcomes when applying tax law.  The hiring of a CPA is an important decision not to be based solely on advertisements.

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