Cash Flow

Cash Flow

Cash flow is an accounting term that is basically the net total of cash and other cash equivalents that come into a business, and out again. Cash flow can be seen like a high and low tide in the way that it ebbs and flows.  There are two types of cash flow.  There is positive cash flow and negative cash flow.

Positive Cash Flow

Positive cash flow is where a business is taking in more liquid assets than paying out in debts.  The company’s liquid assets are increasing to the point where the business can pay off debtors, reinvest money into their business for growth and development, pay more money out to shareholders, pay any expenses, and put money aside for future endeavors. Having positive cash flow is the type of position that any company wants to find itself.

Negative Cash Flow

Negative cash flow is the opposite of positive, and if this trend continues for a business could be detrimental to it. This means that there are less liquid assets coming into the business that can be used to pay off debts, invest in the business, set aside money for shareholders, handle expenses, or put aside for a rainy day.  Often, business is unable to stay afloat long with not having enough money coming in to pay off debts from creditors.  Situations like this are not ideal for any business, and this must be solved quickly to ensure that the business stays open.

Cash and Cash Equivalents in Cash Flow

Cash and cash equivalents are considered the liquid assets of a company meaning that these monetary sources that the business has quick access to for running the business. These include any currency taken in, such as paper money and coins, checks that are not yet deposited, petty cash, checking accounts, money market accounts, savings accounts, and other investments that are considered short-term investments, such as U.S. Treasury bills.

The cash in hand, in the bank, or assets that can be liquidated quickly are all part of a company’s cash flow.

Cash Flow Examples

Positive Cash Flow

Stan’s Restaurant has received $35,000 in cash payments from customers for the month of March. This is their incoming cash and cash equivalents.  The amount of money that is owed for building rent, electricity and other debts is $15,000. In this simplistic example, there is positive cash flow because the amount of money flowing into the business was more than the amount that the restaurant needed to pay out for that month.

Negative Cash Flow

Stan’s Restaurant has received only $10,000 for the month of April with cash flowing into the business.  However, the debt amount has not changed from the $15,000.  In this instance, they are in the negative comparing their cash coming in and the money flowing out by $5,000.

Merriam-Webster Online Dictionary
cash flow (noun)
a measure of an organization's liquidity that usually consists of net income after taxes plus noncash charges against income
a flow of cash , especially one that provides solvency

Positive Cash Flow, Negative Cash Flow
« Back to Glossary Index

Debt Collection News

  • City swallows bitter sewer pill

    April 25, 2018
    HAYDEN — City council members here Tuesday night wrote off $10,507.45 in delinquent sewer utility bills that were past the statute of limitations on collections. Treasurer Sandee Rudy explained that the cause was Hayden's lack of control over city sewer utility services. Hayden residents pay their ...
  • Debt Collection Software Market to Grow at a High CAGR of by 2022

    April 25, 2018
    Worldwide Market Reports added Latest Research Report titled “Credit Insurance Market predicts rise in demand by 2022”. Debt Collection software is used to automate the management and accounting process to go after overdue invoices on behalf of an organization or a specialized collection agency.
  • Abingdon BID board head 'powerless' to stop threatening letters

    April 25, 2018
    Chairman Mel Inness said she had no control over debt-collection agency Capita, which sent the letters, and that the issue had been caused by the length of time taken to complete the review – requested on February 1 but not made public until last week. She explained: “We were initially told it would ...
  • 3 Ways Millennials Can Avoid of Financial Fraud

    April 25, 2018
    Of the types of fraud reported to the FTC, the three most common scams were debt collection (23 percent), identity theft (14 percent), and impostor scams ... Impostor scams come in two common varieties: impostors pretending to call from the IRS or another government or official agency, and impostors ...
  • Eighth Circuit Joins Five Other Circuits in Applying a Materiality Requirement to FDCPA Claims

    April 24, 2018
    In Hill v. Accounts Receivable Services, LLC, a consumer sued a collection agency for violations of § 1692e of the Fair Debt Collection Practices Act (FDCPA) on allegations that the collection agency's exhibits submitted in a state court action—which proved the assignment of the debt from the ...
  • How You Should Respond To Debt Collectors

    April 24, 2018
    [Credit Corrector Solutions] We know the story all too well, you fall behind in a bill. You don't pay it. The creditor realizes they are never going to get their money so they refer it to their "in house" collection department, or a debt buyer or collection agency buys the debt. Now, they begin calling your home, ...
  • Credit repair attorney accused of charging for 'free' legal service

    April 24, 2018
    A metro Detroit lawyer who battles debt collectors and credit reporting agencies has been accused of misleading clients by not being upfront about his practice of taking attorney fees out of settlements for services that he says — and promised to his father on video — are entirely free. The Michigan ...