Operating cash flow is the cash generated from your core business activities, excluding investing and financing activities. It indicates whether your business is self-sustaining.
Operating cash flow (OCF) is arguably the most important metric on the cash flow statement because it shows whether your core business generates enough cash to sustain itself. Positive operating cash flow means your day-to-day business activities produce more cash than they consume. The calculation starts with net profit and adjusts for non-cash items (like depreciation) and changes in working capital (like increases in receivables or decreases in payables). A business can be profitable but have negative operating cash flow if, for example, its receivables are growing faster than collections. Conversely, a business can have positive operating cash flow despite reporting a loss if depreciation is significant. Sustained negative operating cash flow is a serious warning sign - it means the business is consuming more cash than it generates and will eventually run out of money. SortBooks helps monitor operating cash flow in real-time by accurately tracking all operating transactions and working capital movements.
SortBooks automates the bookkeeping processes related to operating cash flow by connecting to your Xero account and using AI to categorise transactions, reconcile bank feeds and generate accurate reports. Instead of manually managing operating cash flow, SortBooks handles it automatically with 97%+ accuracy - saving you hours every week and ensuring your books are always up to date and compliant.
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.
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.
Net profit (also called net income or the bottom line) is your total revenue minus all expenses, including COGS, operating expenses, interest and tax. It is the final profit figure.
Depreciation is the accounting method of allocating the cost of a tangible asset over its useful life. It reduces taxable income each year and reflects the asset's declining value.
SortBooks handles all the complexity automatically. Just connect Xero and let AI manage your books.