Cash flow is the movement of money in and out of your business. Positive cash flow means more money coming in than going out. It is often considered more important than profit for business survival.
Cash flow is the lifeblood of every business. While profit measures whether you are earning more than you spend over time, cash flow measures whether you have enough actual cash available right now to pay your bills, employees and obligations. A profitable business can fail if it runs out of cash, and a business with negative profits can survive temporarily with positive cash flow. Cash flow is categorised into three types: operating cash flow (from day-to-day business activities), investing cash flow (from buying or selling assets) and financing cash flow (from loans, equity or dividends). The cash flow statement is one of the three core financial statements. For small businesses, the most critical metric is operating cash flow - this tells you whether your core business activities are generating enough cash to sustain operations. SortBooks provides real-time cash flow visibility and AI-powered cash flow forecasting, helping you anticipate cash shortages before they become crises.
SortBooks helps with the bookkeeping behind cash flow by connecting to your Xero account and using AI to suggest the right account for transactions sitting in catch-all accounts, learning from your own past coding. Instead of fixing cash flow by hand, you review each suggestion, approve it, and SortBooks updates Xero, GST code included. Then ask the AI CFO about your numbers, using live Xero data.
The cash flow statement is a financial report showing how cash moved in and out of your business during a period. It is divided into operating, investing and financing activities.
Working capital is the difference between current assets and current liabilities. It measures the short-term financial health and operational efficiency of your business.
The P&L (also called the income statement) shows your business revenue, expenses and resulting profit or loss over a specific period.
A cash flow forecast predicts future cash inflows and outflows over a specific period, helping you anticipate cash surpluses and shortages before they occur.
Operating expenses are the day-to-day costs of running your business, excluding COGS. They include rent, wages, utilities, marketing, insurance and administrative costs.
Connect Xero, check the AI's suggestions and approve the changes. SortBooks updates Xero for you.