Cash Flow

What is cash flow?

Cash flow is the actual movement of money through your business. Money flows in when clients pay invoices. Money flows out when you pay for materials, wages, rent, and other expenses. The difference between what comes in and what goes out determines whether you have positive or negative cash flow.

For contractors and small business owners, cash flow often matters more than profit. You can be profitable on paper but still run into trouble if clients pay slowly while your bills are due now.

Positive vs. negative cash flow

The distinction is straightforward:

• Positive cash flow — More money coming in than going out. You can pay bills, invest in growth, and build reserves.
• Negative cash flow — More money going out than coming in. You're depleting savings or taking on debt to cover gaps.

Managing cash flow

Healthy cash flow doesn't happen by accident. Strategies that help:

• Invoice promptly — Send invoices immediately when work is complete
• Set clear payment terms — Shorter terms mean faster payments
• Request deposits — Get cash upfront before starting large projects
• Follow up on late payments — Don't let overdue invoices slide
• Time your expenses — Align outgoing payments with incoming revenue when possible