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What Is Cash Flow? A Small-Business Guide

Learn how cash inflows, outflows and opening balance affect a business's ability to pay its bills.

Cash flow is the movement of money into and out of a business over a period. It answers a practical question: will enough cash be available when bills are due? A profitable business can still run short of cash if customers pay late or inventory is purchased well before it sells.

The basic calculation

Net cash flow equals cash received minus cash paid. Closing cash balance equals opening cash balance plus net cash flow. For example, begin the week with 2,000, receive 3,500 from customers and pay 4,200 to suppliers and staff. Net cash flow is −700, leaving 1,300 at week's end. This is a simple cash view, not a full accounting cash-flow statement.

What belongs in each side?

Inflows may include customer payments, loan proceeds or owner contributions. Outflows may include supplier payments, payroll, rent, tax and loan repayments. Count money when it actually moves, not when an invoice is created. If you use multiple accounts, decide whether to combine them before comparing periods.

How to use a weekly forecast

  1. Write down your current bank and cash balance.
  2. List expected receipts by their realistic payment date.
  3. List committed payments and their due dates.
  4. Calculate the expected balance after each week.
  5. Investigate any week where the balance becomes too low.

A forecast is only useful if you revise it when customers pay later than expected or expenses change. Keep a buffer for uncertain costs. Use the cash flow calculator for a quick single-period estimate, then keep a dated record for ongoing decisions.