{"id":"concept:cash-flow","kind":"concept","label":"Cash Flow","synonyms":["cash flow statement","money movement"],"definition":"Cash flow is the actual movement of money into and out of a business or household's bank accounts, a different question from profit that can move in the opposite direction in the same month.","summary":"Did money actually move, not just get counted as income or expense. A profitable month on paper can still leave the bank account thin if customers haven't paid yet; a big loan can make cash flow look strong while profit hasn't moved at all. BalanceMCP doesn't have a formal cash flow statement yet — cash_position plus reconciliation covers the same ground today.","explanation":["Cash flow asks a plainer, more urgent question than profit does: did actual money move into or out of the bank? A profit and loss statement asks whether income exceeded expenses on whatever basis the books are recorded on; cash flow asks whether the bank balance actually went up or down. The two can move in opposite directions in the very same month.","The clearest version of the gap: a business issues invoices worth more than its expenses this month, so the P&L shows a healthy profit — but if none of those customers have paid yet, the bank account hasn't moved at all. A large cash purchase creates the mirror problem: buying a $3,000 piece of equipment drops the bank balance by $3,000 immediately, but that purchase may not hit the P&L as a lump expense the same month; it can sit on the balance sheet as an asset instead, working its way onto the P&L gradually through depreciation.","Borrowing money creates the opposite illusion. A $10,000 loan makes the bank balance jump immediately, but it's not income — it's a liability, so profit is completely unaffected even though cash just changed dramatically. A healthy-looking balance funded by debt is a very different situation from the same balance funded by earnings, and only cash flow, not the P&L, hints at the difference.","Worth stating plainly: BalanceMCP doesn't yet have a dedicated, formal cash flow statement — the kind broken into operating, investing, and financing activities. What exists today is cash_position, a real-time snapshot of the actual balance across every connected account, and reconciliation against a real bank statement. Reading a P&L alongside a current cash position lets you reason about the same gap a formal cash flow statement is built to show, without it being packaged as one report yet."],"commonMistakes":["Assuming a profitable P&L means the bank balance is healthy — the two can move in opposite directions in the same month.","Expecting a formal, categorized cash flow statement from BalanceMCP today — it doesn't exist yet; cash_position and reconciliation are the current tools for reasoning about the same gap.","Treating borrowed money as income because it made the bank balance jump — a loan is a liability, never profit, no matter how it looks arriving in the account."],"category":"statements","questions":[{"question":"Can a business be profitable and still run out of cash?","answer":"Yes — income on paper can look strong, largely because customers haven't paid yet, while actual cash to cover bills runs thin. Profit and cash flow are genuinely different questions."},{"question":"Does BalanceMCP have a cash flow statement?","answer":"Not a dedicated, formal one yet — no breakdown into operating, investing, and financing activities. Today, combine the P&L with a cash_position snapshot to reason about the same gap."}],"url":"/glossary/cash-flow","relatedTo":[{"id":"concept:cash-position","relationship":"related","weight":0.9,"api":"/api/knowledge/concept%3Acash-position"},{"id":"concept:profit-and-loss","relationship":"related","weight":0.9,"api":"/api/knowledge/concept%3Aprofit-and-loss"},{"id":"concept:accrual-basis","relationship":"related","weight":0.9,"api":"/api/knowledge/concept%3Aaccrual-basis"},{"id":"concept:cash-basis","relationship":"related","weight":0.9,"api":"/api/knowledge/concept%3Acash-basis"},{"id":"concept:net-income","relationship":"related","weight":0.9,"api":"/api/knowledge/concept%3Anet-income"},{"id":"guide:what-cash-flow-tells-you-that-profit-and-loss-doesnt","relationship":"references","weight":0.7,"api":"/api/knowledge/guide%3Awhat-cash-flow-tells-you-that-profit-and-loss-doesnt"},{"id":"tool:cash_position","relationship":"references","weight":0.7,"api":"/api/knowledge/tool%3Acash_position"}],"referencedBy":[{"id":"concept:accrual-basis","label":"Accrual Basis","url":"/glossary/accrual-basis"},{"id":"concept:cash-basis","label":"Cash Basis","url":"/glossary/cash-basis"},{"id":"concept:profit-and-loss","label":"Profit and Loss Statement","url":"/glossary/profit-and-loss"},{"id":"concept:accounts-receivable","label":"Accounts Receivable","url":"/glossary/accounts-receivable"},{"id":"concept:cash-position","label":"Cash Position","url":"/glossary/cash-position"},{"id":"guide:what-cash-flow-tells-you-that-profit-and-loss-doesnt","label":"What Cash Flow Tells You That a P&L Does Not","url":"/guides/what-cash-flow-tells-you-that-profit-and-loss-doesnt"},{"id":"tool:cash_position","label":"See how much cash you actually have, across every account","url":"/tools/cash_position"}],"license":"https://creativecommons.org/licenses/by/4.0/","attribution":"BalanceMCP — https://balancemcp.com"}