# What is Cash Flow?

What is Cash Flow? The movement of cash in the business. 'Profitable on paper, broke in the bank' — a common problem in growing stores.

## How it works in practice

You bought $22,000 of inventory, sold $14,000 — on paper that's $14,000 in revenue, but $0 in the bank. Cash flow requires planning.

## Related metrics

- MOQ — a high MOQ means cash going out
- Lead Time — inventory in transit is cash tied up
- Revenue — cash flow is not the same as revenue
- Net Terms — payment terms affect it

## Common misconception

'Having sales means having cash.' A B2B store with Net 60 terms can go bankrupt despite growth.

## How to fix it

Negative cash flow? (1) reduce inventory, (2) increase inventory turns, (3) sufficient net terms, (4) a 90-day cash flow forecast.

## Real-world example

A fashion store: $55,000 in revenue, 'profitable.' It bought $95,000 of summer inventory. Bank balance: $0. Couldn't pay rent.

## Where to start

Build a monthly cash flow forecast. Keep 3 months of fixed expenses as a reserve.

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Category: Finance · From the [Jimmy OS KPI Glossary](https://jimmy-os.com/glossary/kpi.md) · Source page: https://jimmy-os.com/glossary/kpi/cash-flow