Cash flow

Cash flow is simply the money that flows into and out of your business’s account over a given period. It tracks the actual movement of money, not profit (the profit calculated on paper): a business can show a profit and still lack the cash to pay its bills.

At a glance

The actual money coming in and going out over a given period
Different from earnings (profit on paper, which isn’t always in the bank)
A profitable business can still lack liquidity (money available right away)
The cash flow statement is one of the three basic financial statements
Keeping track of it helps you manage GST/QST remittances, payroll, and major purchases without stress

Why it matters

Imagine you sell $10,000 worth of merchandise, but the customer won’t pay you for another 60 days: on paper, you’ve made a profit, but your bank account is empty today. That’s exactly what cash flow reveals. Tracking it helps you anticipate cash flow shortfalls, especially when it’s time to remit GST (the 5% federal tax) and QST (the 9.975% Quebec tax) or pay your employees. Bankeo provides you with a vetted accountant/CPA for free to help you build your cash flow forecasts, and we’re here to support you every step of the way.

Let’s go back to the example: that $10,000 that’s been invoiced but won’t be collected for another 60 days inflates your profit without actually adding to your account, that’s exactly the gap that cash flow reveals. We monitor it closely around payment dates GST and QST and payroll deductions, the due dates for which are set by Revenu Québec (source). It’s a close cousin of the working capital, and it complements the EBITDA, which doesn’t tell you anything about the cash you actually have available. Bankeo provides you with a vetted accountant, for free, to help you create a simple, month-by-month forecast, and we’re here to support you every step of the way.

Frequently asked questions

What exactly is cash flow?

It’s tracking the money that actually comes in and goes out of your account, day by day. Not theoretical profit, real money. It answers the simplest question an entrepreneur can ask: “Do I have enough cash on hand to pay for what’s coming up?”

What’s the difference between profit and cash flow?

Profit is an accounting calculation (revenue minus expenses), even if the customer hasn’t paid yet. Cash flow, on the other hand, only counts money that has actually been received or paid out. Customer payment delays and inventory purchases often create a discrepancy between the two.

How can I better manage my cash flow?

By creating a simple forecast of cash inflows and outflows for the coming months, you can identify cash flow gaps in advance (payroll, taxes, major purchases). Bankeo connects you, for free, with a vetted accountant or CPA who will set up this tracking system with you, at no cost to the business owner, and we’ll be there for you every step of the way.