How can net cash flow help companies improve financial planning and stability?
Think of cash flow like oxygen for your business. You can have the most impressive sales figures, exciting new contracts, and ambitious growth plans, but if the cash isn't flowing properly, your company will struggle to survive, let alone thrive.
This reality typically hits mid-sized companies particularly hard since they're complex enough to have multiple subsidiaries, different currencies, and various banking relationships, but they don't usually have the deep pockets of multinational corporations to cushion any missteps.
That's why UK mid-market CFOs are placing growing emphasis on metrics like net cash flow . According to Deloitte's UK CFO Survey for Q1 2024, CFOs list cost control and increasing cash flow as their leading business priorities for the coming year. This heightened focus on liquidity reflects ongoing economic uncertainty and underscores the importance for mid-sized companies to invest in advanced cash flow forecasting and management.
While profit figures can sometimes paint a rosier picture than reality, net cash flow tells you exactly what's happening with your money right now – what's coming in, what's going out, and what you've actually got to work with. It’s a ‘warts and all’ picture, which is no bad thing!
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What is net cash flow?
Net cash flow is relatively straightforward to calculate and to interpret – it's simply what's left after you subtract all the money going out from all the money coming in during a specific period. In essence, it gives you a clear picture of your liquidity position, showing whether you are building up cash or burning through it.
What is the formula for net cash flow?
Net cash flow = total cash inflows – total cash outflows
So, if £500,000 flows into your business from customer payments this quarter, but you spend £450,000 on salaries, suppliers, and rent, you're left with £50,000 in net cash flow.
Read about other useful cash flow formulae.
Is net cash flow the same as profit?
There's an important distinction to make here: net cash flow isn't the same as profit. You can show a healthy profit on paper while your bank account is running dangerously low. This happens when you're selling on credit terms but customers aren't paying on time.
In short, net cash flow cuts through any 'noise' and answers the question “how much money do we really have available right now?” Monitoring it regularly brings tangible advantages for the company's financial health, such as being able to:
Spot liquidity gaps before they become crises
Build trust with banks, investors, and your board
Make faster, fact-based decisions on hiring, investment, or expansion
Stay resilient when revenue cycles or supply chains fluctuate
The components: from operating cash to financing cash flow
Net cash flow is usually broken into three streams that each tell part of your business story:
Operating cash flow. Covers your day-to-day business activity – the money flowing from your core operations. Think money from the sale of goods to customers, payroll going out to staff, payments to suppliers, and routine expenses like rent and utilities. For most healthy businesses, this should be positive, showing that your main operations are generating more cash than they consume.
Investing cash flow: Tracks spending on longer-term assets like equipment, property, or acquisitions, as well as any proceeds from selling assets. Don't be alarmed if this figure is negative – it often is during growth phases when you're investing in new machinery, technology, or expanding your facilities. The key is ensuring these investments will generate future returns.
Financing cash flow. Captures movements related to how you fund the business – taking out loans, repaying debt, issuing shares, or paying dividends to shareholders. A growing company might show positive financing cash flow as it raises capital, while an established business might show negative flow as it pays down debt or returns money to investors.
When you add these three streams together, they paint a complete picture of your liquidity and financial health. You can see whether your operations are self-sustaining, how much you're investing in growth, and how you're managing your capital structure.
Component | What it covers | Typical interpretation |
|---|---|---|
Operating cash flow | Day-to-day activity: sales receipts from customers, payroll, supplier payments, rent, utilities. | Should usually be positive – shows core operations generate more cash than they consume. |
Investing cash flow | Purchases or sales of long-term assets: equipment, property, acquisitions. | Often negative during growth phases – indicates investment for future returns. |
Financing cash flow | Funding movements: new loans, debt repayment, issuing shares, paying dividends. | Positive if raising capital; negative if repaying debt or returning funds to investors. |
Real-world cash flow forecast example: a growing manufacturer
Let's look at how this plays out for a mid-sized manufacturing company during Q1 of the financial year:
Category | Money in | Money out | Net result |
|---|---|---|---|
Operations | £500,000 from customer payments | £420,000 for staff, suppliers, and overheads | +£80,000 |
Investments | N/A | £50,000 for new machinery | -£50,000 |
Financing | £100,000 from a new loan | £20,000 in loan repayments and dividends | +£80,000 |
|
| Total net cash flow | +£110,000 |
Drilling into the numbers, the story here is quite positive – the business generated £80,000 ins revenue from its core operations, invested £50,000 in equipment to support future growth, and brought in £100,000 in fresh financing. As such, they ended the quarter £110,000 better off in cash terms.
The balance sheet perspective
There's another way to think about net cash flow that many finance teams find useful. Rather than tracking individual transactions, you can look at your balance sheet position:
Working capital approach: net cash flow = working capital – working capital requirement (WCR)
Liquidity approach: net cash flow = liquid assets – short-term financial debt
This balance sheet view highlights that the company’s cash position depends heavily on timing. When do customers actually pay their invoices? How long can you hold inventory before it sells? When do supplier payments fall due?
For startups and scale-ups, this timing analysis helps determine how long the business can survive without additional funding. For established companies, it's essential for managing day-to-day liquidity and avoiding any nasty surprises
Net cash flow vs other financial metrics
Although finance teams track dozens of different metrics, they don't all serve the same purpose. Understanding where net cash flow fits in the bigger picture helps explain why it deserves a little special attention.
The confusion often starts with EBITDA . Many businesses use this metric as a proxy for cash generation, but it can be misleading. In reality, EBITDA tells you about operational performance and is useful for valuations, but it ignores the timing of when cash actually changes hands. So, you might have excellent EBITDA margins, but if customers are slow to pay or you're carrying too much inventory, your cash position could be precarious.
Meanwhile, free cash flow (FCF) gets closer to reality by accounting for capital expenditure, but it's primarily designed for investors assessing long-term value creation. It doesn't answer the immediate question of whether you can meet next week's payroll.
Net cash flow, by contrast, cuts straight to the heart of cash and liquidity management.
Metric | Definition | What it tells you | What it misses |
|---|---|---|---|
Net Cash Flow | Inflows minus outflows in a period | Actual liquidity available | Doesn’t show profitability or long-term value creation |
EBITDA | Earnings before interest, tax, depreciation, amortisation | Operating performance, common in valuations | Ignores timing of cash movements |
Free Cash Flow | Operating cash flow minus capital expenditures | Cash left after asset maintenance; important for investors | Not focused on immediate solvency |
As the table shows, a company might report strong EBITDA growth quarter after quarter, but if customers are extending payment terms or inventory levels are creeping up, a liquidity crisis could be brewing beneath the surface. Net cash flow is your early warning system – it's the most reliable measure of whether you can actually pay the bills that are due today.
Common pitfalls to avoid: net cash flow issues
Despite its simplicity, many companies make missteps when managing net cash flow. Some of the most common pitfalls include:
Confusing profit with cash. Profitability on paper does not guarantee liquidity.
Relying on outdated spreadsheets. Forecasts are only as good as the data behind them.
Ignoring timing. Late customer payments can derail even strong sales performance.
Focusing only on operations. Investment and financing flows are just as critical.
Challenges in monitoring net cash flow
Ask any CFO about cash flow visibility and they'll tell you it's absolutely crucial. But most mid-sized finance teams wrestling are working with tools that weren't designed for the complexity and speed of business that they're typically dealing with.
What's more, when your cash data lives in five different systems, or bank feeds don't talk to your ERP (meaning manual workarounds are needed), even the best finance team can struggle to stay on top of things. If you can't trust your own cash forecasts, though, you're always playing defence, constantly firefighting problems instead of getting ahead of them.
Challenge | Why it matters |
|---|---|
Fragmented data | Mid-market firms often juggle multiple bank portals, ERP systems, and accounting platforms. Consolidating this data into one view is time-consuming, and by the time a spreadsheet is reconciled it is already out of date. |
Manual and error-prone processes | Excel remains the default tool for many businesses. While flexible, it is vulnerable to human error and version control issues, with different teams often working from different versions of the truth. |
Multi-entity, multi-currency complexity | Subsidiaries in different markets add layers of difficulty. A group may look cash-rich in one currency but struggle when converting into another to service debt in USD or EUR. |
Lack of confidence in forecasts | Static forecasts that are not refreshed regularly lose credibility fast. Nearly half of finance leaders admit they do not fully trust their own cash data, leading to unpleasant surprises and reactive decision-making. |
Struggling with these challenges?
Get a head start with our free cash flow forecasting Excel template—a practical tool to help you build more reliable, flexible forecasts, and gain better control over your liquidity.
How to get cash flow monitoring right
In Agicap’s experience, companies that do cash flow monitoring well tend to follow a few core principles.
Get everything in one place. Bringing all your cash data together – every bank account, subsidiary, and currency feeding into a single view – means you can see the whole picture at once and any problems become obvious quickly. Instead of discovering that one division is struggling while another is sitting on surplus cash three weeks after the fact, you can spot these imbalances immediately and move money where it's needed.
Let the system do the heavy lifting. Manual forecasting is a recipe for burnout and errors. The best tools pull data directly from your ERP and accounting systems, apply your assumptions, and update automatically as new information comes in. This means forecasting is always current. It also makes scenario planning much easier – you can test "what if sales drop 10%?" or "what if we delay that equipment purchase?" without rebuilding the entire model.
Connect cash planning to business decisions. Cash flow can't exist in isolation. Every major decision, whether it's hiring new staff, buying equipment, or expanding into new markets, has cash implications. Modelling these impacts before decisions get made, not after can help prevents growth plans from turning into cash crunches.
Learn from what went wrong (and right), Tracking the differences between what you forecast and what actually happened is one of the most valuable exercises you can do. These patterns tell you where your assumptions need adjusting and help you get better at predicting what's coming next. It might look something like this:
Month | Forecast | Actual | Variance | What happened |
|---|---|---|---|---|
April | +£120,000 | +£90,000 | –£30,000 | Major client delayed payment |
May | +£100,000 | +£140,000 | +£40,000 | Collections came in faster than expected |
June | +£110,000 | +£85,000 | –£25,000 | Unplanned equipment maintenance |
Give people what they actually need. Your board doesn't want to see every single bank transaction, and your bank doesn't care about your internal management metrics. The key is having systems that can automatically generate the right level of detail for each audience – high-level trends for executives, detailed compliance reports for lenders, and operational dashboards for the finance team.
How Agicap supports better cash flow management
As we’ve explored in this article already, mid-sized companies often have the discipline to monitor cash, but lack the tools to do it efficiently. Spreadsheets simply don’t cut it at scale.
Agicap was designed specifically to solve this gap. By centralising liquidity data, automating forecasts, and making analysis user-friendly, it allows finance teams to move from reactive number-crunching to proactive decision-making:
Agicap capability | Why it matters for mid-sized firms |
|---|---|
Real-time consolidation across all accounts and entities | Eliminates fragmented data by pulling everything into one view, reducing manual reconciliations and delays. |
Rolling forecasts automatically updated from ERP and accounting data | Keeps projections fresh and reliable, avoiding the credibility problems of static Excel models. |
Scenario modelling for rapid “what if” analysis | Enables CFOs to stress-test decisions such as delayed receivables, new financing, or investment projects, and see liquidity impacts immediately. |
Multi-entity, multi-currency support | Simplifies group-level visibility by consolidating across subsidiaries and geographies without manual conversions. |
Receivables and payables integration | Improves forward-looking accuracy by factoring in payment terms and customer behaviour. |
Tailored dashboards for CEOs, boards, and banks | Translates cash insights into formats stakeholders trust, strengthening communication and negotiation. |
With Agicap, finance teams benefit from a single, reliable source of truth on cash and liquidity—saving time, reducing risk, and enabling smarter, faster decisions. Instead of spending hours updating spreadsheets, your team can focus on what really matters: ensuring your business has the cash to grow, adapt, and lead.
Curious to see what this looks like in action?
Book a free demo to discover how Agicap can help you transform your cash flow management—without the complexity.
Case study: How Vivason stopped drowning in spreadsheets
Vivason operates over 50 hearing aid centres across France, and as they grew, so did their cash flow headaches. With multiple legal entities to manage, the finance team was drowning in spreadsheets, manually piecing together cash data from dozens of different sources.
Jean-François Olivesi, the company’s CFO, knew they needed visibility at every level: "We have a certain number of legal entities, so we can have this vision by entity and we also have a vision of consolidation... And in this vision of consolidation, we can go back down by legal entity, or even to the level of the store."
The manual approach was time-consuming, and healthcare reimbursements arriving on unpredictable schedules made forecasting even trickier.
Agicap’s solution
Olivesi knew exactly what he needed: "What I really wanted was a tool that automatically categorises my flows. And on the forecasting part, to be able to forecast in a simple yet sophisticated way."
Agicap delivered on both fronts. Reports that once took days now happen in minutes, forecasting accounts for healthcare reimbursement delays, and the team can drill down from group level to individual stores instantly.
Before Agicap | With Agicap |
|---|---|
Manual spreadsheet updates prone to human error | Instant consolidation of all accounts and entities in one view |
Limited forward visibility due to reimbursement delays | Rolling forecasts that account for delays and new store openings |
Reports took days to prepare and validate | Automated reporting produced in minutes with reliable accuracy |
Now, instead of constantly battling cash problems, Vivason's team can plan ahead. When they're considering opening new centres, they can model the impact on net cash flow and ensure they have the liquidity to support growth.
Case study: Wyz Group gets a firm grip on cash flow
French tech company Wyz Group had a cash flow challenge that many mid-sized businesses would recognise. While supporting car manufacturers, their billing cycle created a monthly rollercoaster of cash movements that was nearly impossible to manage manually.
Joëlle Guirard, CFO, explains the challenge: "Our cash flow issues are very important since we bill major customers on a monthly basis. We have big cash inflows and outflows around the 15th of the month."
The daily reality was exhausting for the finance team. Someone had to log into each bank portal, check which major clients had paid, track down the ones that hadn't, and try to piece together a picture of their actual cash position. As Guirard puts it: "Before Agicap, we had to go to each of the bank accounts and detail which large customer had paid or not. It was extremely complicated on a daily basis to manage."
Before Agicap | After Agicap |
|---|---|
Scattered data across bank portals and spreadsheets | Instant consolidation of all bank accounts and entities into a unified cash view |
Daily manual tracking of payments and status | Automated visibility, enabling the team to see real-time inflows and plan accordingly |
Reactive cash management, often caught off-guard | Proactive liquidity control, ensuring each subsidiary has what it needs to pay suppliers |
After implementing Agicap, and consolidating all cash data in one place, Wyz Group can actively manage liquidity rather than just track it. "We consolidate all the bank accounts and this allows us to orientate cash flows in the best possible way so that each of the subsidiaries has the necessary funds in its account to pay its suppliers," Guirard explains.
So, instead of spending their days reconciling accounts, the finance team now focuses on forecasting, planning, and ensuring Wyz Group stays ahead of its cash needs.
Check out the full Wyz Group case study for more details.
Taking control of net cash flow
For mid-sized companies, net cash flow is the clearest lens on financial resilience. Companies that take the time to get it right know exactly what's coming in and going out, they can spot problems months before they hit, and they make decisions with confidence because they understand the cash implications.
In other words, when you centralise your data, automate your forecasting, and integrate cash planning into every major decision, you can stop playing defence and start playing to win.
FAQs on net cash flow
What is net cash flow?
Net cash flow is the difference between all the money flowing into your business and all the money flowing out during a specific period. If you had £100,000 coming in from sales and £80,000 going out for expenses, your net cash flow would be +£20,000. Unlike profit, which can include non-cash items, net cash flow tells you exactly how much actual cash you have to work with.
How do you calculate net cash flow? What is the formula?
The basic formula is:
Net cash flow = total cash inflows – total cash outflows
You can also break it down by category: Operating Cash Flow + Investing Cash Flow + Financing Cash Flow. This three-part approach helps you see whether your core business is generating cash, how much you're investing in growth, and how you're managing debt and equity.
What is the formula for free cash flow (FCF)?
Free cash flow (FCF) is different from net cash flow because it measures how much cash a company generates after covering its operating expenses and capital expenditures. It’s often used by investors to assess a company’s ability to generate value beyond what’s needed to keep the business running.
Free cash flow = operating cash flow – capital expenditures (CapEx)
How is net cash flow different from NPV?
Net cash flow measures actual cash movements that have already happened during a specific period – it's historical and factual. NPV (Net Present Value) is a forward-looking calculation that discounts future expected cash flows back to today's value, typically used for evaluating whether an investment or project is worthwhile. Net cash flow tells you what happened but NPV helps you decide what to do next.
What is a good net cash flow?
Generally, positive net cash flow is healthy as it means you're generating more cash than you're using. However, negative net cash flow isn't always problematic – it might reflect strategic investments in equipment, expansion, or inventory that will generate future returns. The key is understanding why your net cash flow is positive or negative and whether it aligns with your business strategy.
What is net cash outflow?
Net cash outflow occurs when your cash outflows exceed inflows, resulting in negative net cash flow. This might happen during planned expansion, large equipment purchases, or seasonal business cycles. While short-term outflows can be strategic and normal, sustained net cash outflows without a clear plan can lead to liquidity problems and threaten business viability.
