Origin Dictionary / OD-016
Cash Flow
A business can make a profit and still miss payroll.
01Dictionary Meaning
Cash flow is the movement of money into and out of a person, business or other entity over a period.
02What People Think
"If more comes in than goes out, timing takes care of itself."
03What’s Underneath
A business completes work in March, invoices a customer and receives payment in May. Wages and rent still leave the account in April.
The sale can count toward profit before the cash arrives. A household can face the same timing problem when an annual bonus is used to justify monthly commitments.
Totals matter, but the calendar matters too. A gap can create a need for reserves or borrowing even when the year looks healthy overall.
04The Game
Who gets paid first, who can wait, and who finances the gap between doing the work and receiving the money?
05One Line
Profit can appear on paper before cash appears in the account.
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M1Youth Finance
Follow money through the calendar.