What is Cash Flow?
Nexa Consultancy | Startup & Finance Glossary
Cash flow is the net amount of cash moving into and out of a business. It's a critical indicator of financial health, showing a company's ability to meet its short-term obligations like paying salaries and suppliers.
Why it Matters for Startups:
For an early-stage startup, cash flow is more important than profit. A startup can be profitable on paper but go bankrupt if it runs out of cash. Managing cash flow effectively is the primary focus of a virtual CFO, as it directly impacts the company's runway and survival. Use our Cash Flow Tracker Template to get started.
Example:
A startup invoices a client for ₹10 Lakhs. While this counts as revenue, the company's cash flow only improves when the client actually pays the invoice. The period in between creates a need for working capital management.