Lapasar
Finance & Payments

Cash Flow

Cash flow is the movement of money into and out of a business over a period, and whether it has enough cash on hand to meet its obligations.

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A business can be profitable on paper yet run out of cash if money goes out faster than it comes in. Cash flow tracks the timing of inflows — customer payments — against outflows such as supplier payments, wages and rent. Positive cash flow means more is coming in than going out over the period.

Procurement has a direct effect on cash flow through payment terms, order timing and inventory levels. Negotiating longer terms with suppliers, buying to demand rather than holding excess stock, and consolidating invoices all help preserve working capital and smooth the cash cycle.

Key points

  • Profit and cash flow are not the same — timing of payments is what strains cash.
  • Longer supplier payment terms improve a buyer's cash position.
  • Holding less inventory frees cash that would otherwise sit on the shelf.

Frequently asked questions

What is cash flow?
Cash flow is the movement of money into and out of a business over a period, showing whether it has enough cash to cover its obligations when they fall due.
How does procurement affect cash flow?
Through payment terms, order timing and inventory levels — longer terms, buying to demand and consolidated invoicing all help preserve working capital.

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