Plain definition
Cash flow is the movement of cash and cash equivalents into and out of a business.
Net cash flow is the difference between money received and money paid during a period. It changes the business’s cash balance.
Worked example
Monetary examples use Saudi riyals (SAR). The same principles apply in other currencies.
A company begins the month with . It receives from customers, pays in salaries, and pays to suppliers.
| Cash received from customers | |
|---|---|
| Salaries paid | |
| Supplier payments | |
| Net cash flow |
| Opening cash balance | |
|---|---|
| Net cash flow | |
| Closing cash balance |
Why it matters
A business needs cash to pay salaries, suppliers, taxes, and other obligations.
The amount and timing of cash movements determine whether it can make those payments when they fall due.
Practical consequence
Review cash flow every week.
Review cash received, cash paid, and the closing cash balance. Then compare the balance with upcoming obligations and their due dates.
Try your own numbers
Map expected cash in and out week by week, then see the lowest point before it arrives.
13-week cash-flow forecast