People often understand the ‘cash’ component of cash flow, but not the ‘flow’ component. As a business, you engage in various activities where money flows through your business. Essentially, you have money coming in and going out of your business.

Money flowing into your business may be:

• income from selling goods or services
• money from selling business assets
• money you have contributed to the business
• money you have borrowed.

Money flowing out of your business may be:

• payments for expenses of running the business
• payments to buy or replace business assets
• payments to you from the business, for example living expenses
• money lent to others. 

Understanding your cash flow means that you know what cash is coming in and going out of your business and when that is happening.  Understanding the cycle of your business will help you plan for your own circumstances.