In layman's terms, cash flow is basically the cash received (coming into the business) over a specific time period less the cash going out of the business in the form of payments. You have a positive cash flow when the cash received exceeds the cash paid out: a simple concept. However, managing and controlling cash can become complex. If the cash being paid out exceeds the cash being received in the business you are in a negative cash flow position. This is critical because, if it persists, your company may be unable to pay its bills and continue operating. It is possible to find yourself in this position even if your Profit and Loss (P & L) statement says you are profitable.


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