There are a few basic terms you need to know to better understand your cash flow. It’s important to know the difference between accrual accounting and cash accounting. 

Accrual accounting is an accounting method that records income (revenue) when it is earned not when it is received. Using this method when you issue an invoice to a customer, you record the income from that invoice on the date the invoice is produced even though the payment is yet to be received. 

Expenses are accounted for in the same way. When you are billed for an expense it is recorded when the expense occurs, not when the expense is paid. The accrual accounting method gives you a good long-term view of your business finances.

Using the accrual accounting method can cause a slight disconnect when you want to know how much cash is available to spend. This is because the accrual method accounts for money that's yet to come into your business and it accounts for expenses that are yet to be paid by your business.