Cash flow
Quick answer
The actual movement of money in and out of a company over a period - a measure of liquidity, not profit.
Key takeaways
- Operating cash flow - customer collections minus payments to suppliers, salaries, taxes
- Investing cash flow - purchases/sales of assets (equipment, property)
- Financing cash flow - loans taken/repaid, capital contributions, dividends
What cash flow is
Cash flow measures the money actually entering and leaving the company over a period. Unlike profit (accrual accounting), cash flow shows whether the company actually has money to pay suppliers, salaries and taxes.
The three components
- Operating cash flow - customer collections minus payments to suppliers, salaries, taxes
- Investing cash flow - purchases/sales of assets (equipment, property)
- Financing cash flow - loans taken/repaid, capital contributions, dividends
Why profitable companies go bankrupt
A company can report profit in the P&L yet run out of cash if: DSO (customer collection term) exceeds DPO (supplier payment term), inventory is oversized, or it pays VAT on uncollected invoices.
Operational levers of cash flow
- Cut DSO - fast invoicing, receivables tracking, B2B portal for orders and payments
- Optimise inventory - less capital locked in stock (see safety stock)
- Match collections - automatic bank reconciliation for real-time visibility
How CRMconnect helps
CRMconnect shortens the order-to-cash cycle: faster orders (OMS/B2B portal), instant invoicing, automatic collection ↔ invoice reconciliation. Result: lower DSO and daily visibility of the cash position.
Real-world example
A profitable distributor was always short on liquidity: DSO 68 days, DPO 30 days. Through the CRMconnect B2B portal (online orders + payments) and automated receivables tracking, DSO dropped to 41 days, freeing ~180,000 RON locked in receivables.
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Frequently asked
Difference between profit and cash flow?+
Profit (P&L) is revenue minus expenses on an invoicing basis. Cash flow is money actually in/out. You can have profit without cash if customers haven't paid yet.
How do I improve cash flow quickly?+
By cutting DSO (faster collection), negotiating longer DPO with suppliers, optimising inventory and, where applicable, using VAT on collection to avoid advancing VAT on uncollected invoices.
How does an operational system help cash flow?+
It accelerates the order-to-cash cycle (order → delivery → invoice → collection) and gives real-time visibility of receivables and collections via automatic bank reconciliation.
Where CRMconnect fits
Related terms
Profit and loss statement
Financial statement showing a company's revenues, expenses and result (profit/loss) over a period.
FinanceDSO (Days Sales Outstanding)
Average number of days from invoice issue to cash collection. Key cash-flow indicator.
FinanceDPO (Days Payable Outstanding)
Average number of days from supplier invoice receipt to actual payment.
FinanceVAT on collection (cash accounting)
Optional Romanian scheme where VAT becomes chargeable when the invoice is collected, not when it is issued.