How To Calculate Net Cash Flow And What It Actually Tells You

Most business owners or finance teams jump straight to profits when looking at their performance. But profit doesn’t mean you have cash in the bank. That’s why net cash flow matters just as much, if not more. It tells you whether your business is becoming more financially stable or if cash flow problems are quietly slipping away. 

If you feel your bank balance is not on the same wavelength as your sales, then net cash flow might be something you need to consider. 

What is net cash flow?

Net cash flow is the difference between all the money that comes into your business and all the money going out over a specific period. It doesn’t care about anything else like the theoretical profits or unpaid invoices; it tracks actual cash movement. 

For example, if you made $80,000 from your business this month but paid bills of around $70,000, your net cash flow is +$10,000. If the outflows were more than what came in, you’re in negative territory. 

This makes net cash flow one of the clearest signs of your financial metrics health, especially in fast-moving or cash-strapped situations. 

How to calculate net cash flow 

Here’s the simple formula: 

Net Cash Flow = Total Cash Inflows – Total Cash Outflows 

But to make this useful, you’ll want to break it down and understand each element: 

• Cash inflows: Revenue from sales, loan proceeds, investment income, customer payments. 

• Cash outflows: Rent, payroll, vendor payments, loan repayments, taxes, equipment purchases. 

It’s great if you’re tracking these separately as it helps you spot how your cash position is, good or bad. 

What net cash flow actually tells you 

Positive net cash flow means you’re generating more cash than you’re spending. You have room to invest, save, or grow without relying on external funding. 

Negative net cash flow isn’t always bad if you’re making big one-time investments, but it still needs attention. If it persists, it can signal trouble ahead, especially if you’re burning through cash to stay afloat. 

Ask yourself these questions: 

• Can we fund growth without taking on any debts? 

• Could we survive a month or two if they sales are very slow? 

• Are our client payment terms too generous or vendor bills coming due too quickly? 

These are some important questions for your business that net cash flow helps answer. 

Net cash flow vs profit: Not the same thing 

This is where a lot of businesses get confused. 

You can be profitable on paper but still have poor cash flow, especially if your customers are slow to pay, or if you’ve spent heavily on inventory or equipment. Profit is based on accrual accounting (which includes non-cash items). Net cash flow, on the other hand, focuses on cold, hard cash. 

That’s why a healthy profit and a tight bank balance can exist at the same time, and why tracking both is essential. 

How to improve your net cash flow 

You don’t need to change everything in your business to improve your net cash flow. Just a few small, smart steps can make a big difference. Here’s what you can try: 

Speed up receivables

Send invoices right away. Forwardly instantly sends a payment link when you hit “Send,” so customers pay you faster. Don’t be laid back as even a day that you delay might add up to more delays in payments. You can offer small discounts as well as early payments. If possible, use online tools that make it easy for customers to pay. The sooner you collect your money, the stronger your cash flow will become.

Optimize payables

Don’t pay bills early unless there’s a clear benefit. Forwardly schedules vendor payouts on their due dates, so you never pay early, and your bank balance stays topped up. Take full advantage of payment terms and negotiate where possible. A few extra days in your account add up and give you the bandwidth to plan receivables and payables properly.

Cut unnecessary outflows

Once a month, scan your bank statement. Cancel tools you’ve stopped using and combine services where it makes sense. A few dollars saved here and there add up fast.

Forecast cash flow regularly

Each week (or month), jot down what you expect to receive and what you need to pay. Spot gaps early and adjust spending before you run short. Cash flow forecast helps you make better decisions and keeps the money movement smooth.

Use the right tools

Platforms like Forwardly make it easy to see what’s coming in, what’s going out, and what’s overdue, so you’re not stuck reacting at the last minute. 

Make cash flow your superpower 

Net cash flow is your business’s reality check. It’s not just about how much money you’re making, it’s about how much you’re keeping, when it arrives, and where it goes. With the right tools and habits, you can improve your net cash flow without cutting corners or burning out your team. Instead of stressing over surprises, you’ll start making moves with confidence. Net cash flow improves when your payments work smarter. 

Forwardly helps you automate bill payments, speed up collections, and stay on top of what’s owed, so your net cash flow improves without manual effort.  

Start simplifying your cash flow with Forwardly today. Want to see how it works? Check out the product tour.