Cash flow is important because it shows the actual amount of cash you have to keep the lights on for your business. You need cash flow to:
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• Pay your regular bills (internet, rent, software, etc.)
• Buy supplies, materials, and resources for your goods and services
• Cover one-off expenses (repairs, large purchases, etc.)
• Pay your employees
• Cover other operating costs

Yes, your cash flow can be negative. If your cash flow is negative, this means your business is spending more money than it makes, which is a problem in the long-run.

When you’re just launching your business, your cash flow will likely be negative as you spend money on the initial software, equipment, and other resources you’ll need to run your business.

If your business continues to have negative cash flow each month, though, you’ll need to find ways to reduce your costs and regular expenses in order to turn your monthly revenue into actual take-home income.

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Cash flow and profit are slightly different metrics that you should monitor for your business. Cash flow shows you how much money you have at hand to cover costs and liabilities, based on cash coming in from sales and cash going out from business expenses. Profit shows you how much financial gain your business is earning from sales of goods and services. Running a profitable business requires you to maintain a positive cash flow.

Here are the steps you need to take to run a cash flow forecast for your business:
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1. Gather your financial documents: Grab any documents that show you how much money is entering and exiting your business in a given month; with accounting software like Wave, you can download P&L statements, balance sheets, invoice reports, tax reports, and payroll documents.
2. Find your opening balance: Your opening balance is the balance in your bank account at the start of a given month. This should equal the closing balance at the end of the previous month.
3. Estimate your receivables: Look at your financial documents and estimate how much money your business earns in sales and revenue each month.
4. Estimate your payables: Look at your financial documents and estimate how much your business spends on rent, utilities, bills, marketing, payroll, and other operating expenses each month.
5. Calculate your cash flow: Use your estimated receivables and payables to calculate your cash flow: Cash Flow = Estimated Receivables - Estimated Payables.
6. Add cash flow to opening balance: Take the cash flow you calculated above and it to your opening balance you found above; this will provide you with a forecast of how much money you’ll end up at the end of the month.