Cash flow is the movement of money into and out of a business over a period of time. Money coming in is positive cash flow; money going out is negative. The balance between the two tells you whether the company has enough cash to meet its commitments when they fall due.
Why it matters more than profit
A business can be profitable and still run into trouble if its cash flow is poor. Profit is what is left after costs over time, but cash flow is about timing. If money goes out before it comes in, even a healthy company can struggle to pay wages or suppliers on the day.
- Slow-paying customers can squeeze cash flow.
- Seasonal businesses often face predictable peaks and troughs.
- Large one-off costs can create a temporary gap.
How finance can help
Short-term finance is often used to smooth cash flow rather than to fund long-term growth, for example to cover the gap between paying for stock and being paid by customers. The key is having a clear plan for how the borrowing will be repaid.
Credicorp lends only to UK limited companies and LLPs for business purposes. We assess whether a Credicorp Flex or Credicorp Slice facility is affordable before lending, so that finance supports your cash flow rather than straining it further.
See also: What is working capital?, What is liquidity?, What is bridging finance?.