Knowledge Base - Cash Flow
The Difference Between Net Income and Cash Flow
Net Income and Cash-flow are not the same. This is why we often hear “My business is profitable, why am I always short of cash. The formula below shows the most common items that result in that difference.
Net Income (accrual basis)
- Increase in Credit from Vendors (Accounts Payable)
- Increase in Income Received but Deferred for Financial Reporting
- Increase in Accrued Liabilities
- Depreciation / Amortization and other Non Cash Expenses
- Increase in Credit Extended to Customers (Accounts Receivable)
- Increase in Inventories
Equals Cash-flow from operations:
- Purchases of Furniture, Equipment or Real Estate
- Increase (Decrease) in Borrowings
- Equity Contributions
If you could use help navigating your cash situation, a LauberCFO would be happy to set up a convenient meeting to discuss how we might assist you.