What does cash flow mean and why does it matter?

Cash flow refers to the movement of money into and out of a business or personal finances over a given period. Money coming in is called inflow, which includes revenue, loans, or investments. Money going out is called outflow, covering expenses like rent, payroll, and supplies. Cash flow matters because it determines whether you can actually pay your bills, even if your finances look profitable on paper. A business can show strong sales but still run into serious trouble if customers pay late or expenses come due before revenue arrives. Positive cash flow means more money is coming in than going out, keeping operations running smoothly. Negative cash flow, if sustained, can lead to insolvency regardless of long-term profitability.