Cash Flow: The Fuel That Drives Your Business

In order to pay your bills, you need to manage the money/cash you have going out and coming in — that is, your cash flow. Before you can have cash flowing out, you must have cash flowing in. When your cash flows out in excess of what flows in, your business is heading for trouble.

To understand the basic concept of cash flow, you first need to distinguish between the following two oft-confused terms:

Cash flow: An operating term that describes the movement of money (cash, checks, electronic debits, and credits) in and out of your business

Profitability: An accounting term that refers to the capability of your business to generate more sales dollars than the cost of operating expenses