Revenue and cash flow are two of the most important financial metrics for your businesses. Regardless of what products or services your business, you should track its revenue and cash flow. All businesses have revenue and cash flow. Like with other financial metrics, though, revenue and cash flow will vary.
What Is Revenue?
Revenue is money that your business generates by selling its products or services. Customers, of course, will purchase your business’s products or services. Whether they pay with cash, credit cards, debit cards, checks, etc., they’ll provide your business with revenue. Your business will generate revenue from the sale of its products or services.
Keep in mind that revenue isn’t the same profits. Your business may generate revenue without turning a profit. If your business’s expenses are greater than its revenue, it won’t turn a profit. You’ll need to keep your business’s expenses lower than its revenue to turn a profit.
What Is Cash Flow?
Cash flow is a measurement of liquidity. It represents money flowing into and out of your business. Revenue is money flowing into your business. When your business generates revenue, its cash flow will typically increase.
In addition to revenue, cash flow takes into account expenses. Money flowing out of your business include expenses. When you pay for utilities, insurance, payroll or other business-related expenses, money will flow out of your business. Cash flow is a measurement of the money flowing into and out of your business.
Differences Between Revenue and Cash Flow
You can’t run a successful business without considering its revenue and cash flow. Revenue refers to money generated by your business from the sale of its products or services. Cash flow, on the other hand, is money that flows into and out of your business.
Revenue only takes into account product and service sales. Cash flow, in comparison, takes into account revenue and expenses. Cash flow is the relation between your business’s revenue — money flowing into your business — and your business’s expenses.
It’s important to note that cash flow can be positive or negative. Positive cash flow means there’s more money flowing into your business than out of your business. Negative cash flow means the opposite. With negative cash flow, more money will flow out of your business than into your business.
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