What is cash flow and how to track it for your small business

Cash flow answers a simple question: how much money came in, how much went out, and how much is left? It follows real money, on the day it moved, which makes it the most direct way to know whether the business can pay this month's bills.

What is cash flow

Cash flow is the date-ordered record of every inflow (sales collected, monthly fees paid, owner contributions) and every outflow (suppliers, payroll, taxes, software, bank fees) over a period. The balance is simple math: inflows minus outflows.

What cash flow is for

• Knowing there's money for this week's and this month's bills.
• Seeing where money goes, by category, and cutting what doesn't make sense.
• Spotting a crunch early: by looking at what's coming in and going out, you can act before you run short.
• Separating business and personal money, with every transaction in the right account.

Cash flow is not profit

Cash flow looks at when money moved. Profit looks at which month the income and expenses belong to, known as the accrual basis. Work done in October and paid in November lands in November's cash and October's result. That's why a business can show a profit and still be out of cash when clients pay late, or have money in the bank and a loss for the month.

Actual vs. forecast cash flow

Actual cash flow is what already happened: your bank statement. A cash flow forecast is what's going to happen: monthly fees to collect, installments to pay, credit card bills. Together they show where your money is heading over the next few months.

How to track cash flow in LUME Hub

In the Management app, Finance builds your cash flow from what you already record. Its screens are in Portuguese, so each tab name below comes with its meaning:

1. Caixa (Cash, actual): the Cash tab lists entries by the date the money moved. Add them by hand, as in how to track income and expenses, or import your statement, as in how to import an OFX bank statement.
2. Saldo do mês (Month balance): the first number at the top of Finance is the selected month's balance (inflows minus outflows), for real accounts only or a single account.
3. Entradas × Saídas (Inflows vs. outflows): the Overview tab charts the last 6 months.
4. A receber (Receivables, forecast): contract installments show what should come in and what's overdue. See how to track accounts receivable.
5. A pagar (Payables, forecast): upcoming expenses, the forecast and due dates, credit card bills included.
6. Resultado (Result, profit): the Result tab shows the month on an accrual basis, with revenue, EBITDA and the bottom line.

Put together, the month balance answers "how much money do I have", Receivables and Payables answer "how much will come in and go out", and Result answers "did the month make a profit?". For the rest of the app, read the Management app guide.