What is Cash Flow? Cash Flow Management

For business owners and financial managers, cash flow management is crucial to the survival of the business and it is associated with that business throughout its operation, so the role of cash flow management is very important. in the business activities of the enterprise. So what is cash flow? What is net cash flow, and is there any method to manage cash flow in the business effectively? Let’s find out.

Cash Flow, Cash Inflows and Cash Outflows

The term cash flow refers to the net amount of cash and cash equivalents being transferred in and out of a company over the time. In other words, cash flow can be understood simply as the movement where cash received represents inflows, while money spent represents outflows.

So cash flow management is the process of understanding and optimizing the amount of money, cash and cash equivalents, moving into and out of a business. A positive cash flow is more money coming in than going out, and a negative cash flow is less money coming in than the business needs to cover outgoings. And, one of the most important goals of cash flow management is to ensure the cash flow is possitive all the time.

A company’s cash flow is typically categorized as:

  • Cash flow from operations
  • Cash flow from investing
  • Cash flow from financing.

How to effectively manage your cash flow

It is said that you won’t be able to fine-tune something if you can’t measure it. So, the first task you should have to do is to measure your cash flow over the points in time by building a cash flow forecast from which you can modify some key performance index to find the impact and make decisions based on the tests.

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