Cash Flow means the flow of cash in and out of a business. It takes into account the timing of cash coming into the business from various sources e.g. sales, loans, tax refunds, interest etc. It also accounts for cash going out of the business e.g. expenses, taxes, dividends, asset purchases etc. The timing of cash movements is different to that of profit and loss. You measure costs against sales when they are made… not when you get paid for them, if you offer terms to your customers. This is where lots of businesses get into trouble. They are making plenty of sales, but they aren’t getting paid quickly enough. On top of that they are paying suppliers, staff, landlords etc. and then end up with Cash Flow squeeze.