What is Cash Flows ?

While revenue is recorded in your profit and loss statement, what makes revenue different from profit is that revenue doesn’t take in to account any of the expenses incurred in producing the goods and services sold.

This is one area that often trips up people who are new to the cash flow statement.

This forecast is an important aspect of your planning and is an essential part of budgeting as it helps you to identify potential areas where a lack of cash may become an issue. It also offers you the opportunity to review and where necessary amend your planned expenditure.

Profit, also known as the “bottom line” of the income statement, is what you get once you subtract all the expenses that went into making and delivering the prints to your customers. And even though profit takes expenses into account, it still doesn’t provide the same information as measuring cash flow.

Accounts payable and accounts receivable are big components of working capital--the source of a company's short-term liquidity.

While revenue and profit give you top and bottom of the line information that tells you if there’s actual demand for your products and services — they don’t show you how and when the funds are actually coming in or leaving your business. And that’s a rather important piece of the picture that you need to see.

Regular monitoring and reviewing of your cash flow forecast is essential because you never know when your budget may be threatened or cut. You will be able to protect your original budget better if you already have arguments for why your budget should not be affected and exactly what the consequences will be if it is.

So when accounts receivable--those are monies owed from vendors and whatnot--goes up, for example, it means that customers are paying their accounts

While revenue and profit are measures of income, cash flow, the amount of money moving in and out of your business over a specific period of time, determines your liquidity.

In order for a set of financial statements to be complete the accounting profession includes a cash flow statement. Like all other financial statements it has to adhere to accepted accounting principles.
The cash flow statement goes beyond what you include in your regular reports showing what cash has come in and what cash went out. A Cash Flow statement can be defined as a reconciliation of the differences between the:

The company is receiving those cash pay ments. Likewise, the opposite is true: increases in accounts receivable are considered uses of cash.

Although liquidity might make you think of things like water or something squishy, the actual definition is not the least bit touchy-feely. What liquidity, or having the right amount of cash flow, really means is your ability to come up with the cold

If the two statements do not tie in this way, it is likely an error occurred.

hard cash to meet your short-term financial obligations. These are commitments like paying your employees, vendors and covering the tab for that fancy new digital printing system you just bought.

Cash flow, recorded in a cash flow statement, is like taking the pulse of your overall financial health. Any irregularities warrant investigation.

The main thing that separates revenue from cash flow is how each metric is recorded.

Revenue is often tracked as it’s earned (or accrued), regardless of whether or not you’ve received payment. Conversely, cash inflows aren’t counted until your home decor customer pays for the 5,000 prints destined for retail centers across the country.

Revenue is fairly one dimensional. You make a $100,000 sale, you record $100,000 in revenue. What you don’t see is whether or not the purchaser pays the invoice in full or how much it actually costs you to make and deliver these goods.

$100,000 in positive cash flow is different. Cash flow tracks both inflows and outflows — it’s a slow-motion replay of your financial performance. If you’ve got $100,000 in positive cash flow, this means you’re bringing in $100,000 once all your regular expenses are paid.

a cash flow in its narrow sense is a payment (in a currency), especially from one central bank account to another; the term 'cash flow' is mostly used to describe payments that are expected to happen in the future, are thus uncertain and therefore need to be forecasted with cash flows.

What cash flow shows you that revenue can’t, is whether or not you’re rolling in dough, breaking even or about to sink into massive debt. A $100,000 purchase order is just a purchase order.

a cash flow is determined by its time t, nominal amount N, currency CCY and account A; symbolically CF = CF(t,N,CCY,A).

what if after the ink dries on your deal, the cost of ink for your printer skyrockets? You might have $100,000 in revenue but nearly double that amount in production costs.

it is however popular to use cash flow in a less specified sense describing (symbolic) payments into or out of a business, project, or financial product.

The reality is that revenue and cash flow paint two completely different pictures.