Cash flow is how much actual money you have coming into your business, as well as leaving it. A cash flow projection is an estimation of your cash flow over a set-period. Most businesses stick to a period of 12 months, tracking their cash flow for a full year.

There’s a difference between cash flow and the value of your business. Many business owners make the mistake of gauging their business’s health by looking at their business value, which can include assets, intellectual property and so on. While these elements are important for attracting investors or selling your business, they’re drastically different from cash flow.

Cash flow is the money you have going in and out of your business, meaning it’s on-hand and available in the short-term. By knowing what your cash flow is, you know how much you’ll have on-hand in the vent of an emergency. If your business location is flooded and needs repairs, your assets or total business value won’t help you, but your cash flow and money on-hand will.

Next: The perks of cash flow projections>>

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