The importance of cash flow

Abstract

Cash flow is of vital importance to a business. One saying says: “Revenue is vanity, cash flow is sanity, but cash is king”. This means that whilst it may look better to have large inflows of revenue from sales, the most important focus for a business is cash flow.Many businesses may continue to trade in the short- to medium-term even if they are making a loss. This is possible if they can, for example, delay paying creditors and/or have enough money to pay variable costs. However, no business can survive long without enough cash to meet its immediate needs.