Calculate your net cash flow for a period based on total cash inflows and outflows.
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Cash flow is the difference between cash actually coming into and going out of a business during a specific period, and it fundamentally differs from "accounting profit" because it measures only real cash movement, not revenue or expenses recorded on paper but not yet actually received or paid. A business can be profitable on its income statement but still face a genuine cash flow crisis if, for example, customers delay payment on invoices while the business still has to pay its own suppliers and employees on time — a mismatch known as the timing gap between accrued revenue and collected cash. This tool calculates the net cash flow for a given period by simply subtracting total cash outflows from total cash inflows, and if you enter an opening cash balance, it also projects the expected closing balance at the end of that period, giving a practical picture of whether the business will have enough cash on hand to meet its obligations.
One of the most common and costly misunderstandings in small business finance is treating profit and cash flow as the same thing. They aren't, and the gap between them has closed more otherwise-healthy businesses than almost any other single financial factor.
Accounting profit is calculated on an accrual basis: revenue counts the moment it's earned (an invoice sent), and expenses count the moment they're incurred, regardless of when the actual cash changes hands. Cash flow, by contrast, only counts money that has actually moved — cash physically received or paid out during the period in question.
The gap between the two shows up constantly in ordinary business operations. A company can send out $50,000 in invoices this month, recording that as revenue and likely showing a healthy profit — while the actual cash from those invoices doesn't arrive for another 30 or 60 days, depending on payment terms. Meanwhile, rent, payroll, and supplier bills still come due on their normal schedule, cash or no cash.
This is exactly the scenario behind the well-known warning that a growing, profitable business can still run out of cash and fail — sometimes called overtrading. Rapid growth typically requires spending more upfront on inventory, staff, and materials to fulfill a rising order book, while payment from those same growing sales lags behind, squeezing available cash even as the underlying business is thriving on paper.
This is why cash flow forecasting, tracking cash in and cash out period by period rather than relying on the profit and loss statement alone, is considered essential financial discipline, especially for growing businesses and those with long payment terms or seasonal sales patterns. Knowing your projected cash position weeks or months ahead gives time to arrange financing, adjust payment terms, or delay non-essential spending before a shortfall actually hits — rather than discovering it the hard way when a bill can't be paid.
No. Profit includes non-cash items and amounts owed but not yet paid; cash flow tracks only actual money moving in and out.
If customers delay payments or too much cash is tied up in inventory, a business can be profitable on paper while facing a real cash shortage.
Consistently positive operating cash flow that covers expenses without relying on financing or drawing down savings is generally considered healthy, even if net profit fluctuates seasonally.