Cash flow is the movement of money into and out of your business over a period, and it determines whether you can actually pay your bills, regardless of profit.
A business can be profitable on paper and still run out of cash, because profit and cash are not the same thing. Under accrual accounting you book revenue when you invoice, but the cash may arrive months later, while payroll, rent and tax remittances demand cash now. Cash flow tracks that timing.
The statement of cash flows, one of the three core financial statements, splits movements into operating, investing and financing activities. For a small business, watching the operating cash flow, and the gap between when you pay suppliers and when customers pay you, is often more urgent than watching profit.
You land a $100,000 contract that is profitable, but you must pay staff and suppliers over three months before the client pays on completion. Without enough cash on hand or a line of credit to bridge that gap, a profitable contract can still sink the business.
Our certified accounting firm handles this for businesses and individuals across Canada, at fixed fees with no surprises.
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