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Cash Flow

Cash flow, also known as net cash flow, is process of monitoring cash in and cash out during a specific period of time.


Cash flow is used to evaluate the performance of a business or project, and often to monitor liquidity and ensure that there’s enough cash available to keep the lights on. Cash flow is also used to examine a business's growth, whether it’s able to grow, or whether it needs to take measures in order to pay the bills. Positive cash flow is what every business aspires to. It means business is healthy and expanding, and able to make new investments.


Cash flows come in from three areas: operations, financing, and investments.


In order to analyse the cash flow, the direct method and the indirect method are two cash flow methodologies. As we discuss in the cash flow statement definition, in the direct method, amounts for cash from customers and cash paid to suppliers are listed and net income is reconciled to cash by operating activity. When using the indirect method, which is commonly preferred, the net income is listed, followed by adjustments - adding or subtracting balance sheet items - which bring the figure from an accrual basis to a cash basis. This method is more accommodating to factors like depreciation.


Discover how CCH Tagetik Performance Management Software delivers:

Cash Flow Analysis