The Difference Between Cash Flow and Net Income

Desarie Anderson, CPA, EA
A free video tutorial from Desarie Anderson, CPA, EA
Certified Public Accountant
4.3 instructor rating • 7 courses • 1,412 students

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Cash Flow Management

Understanding Cash Flow And How Cash Flow Differs From Net Profit

52:55 of on-demand video • Updated July 2017

  • Understand why having a cash flow problem is much risker than having a few months of losses in your business
English [Auto] Hi and welcome back. There is some confusion at times about the difference between net income and cash flow. So in this section I'm going to attempt to explain the difference between the two. Cash flow is not the same as net profits. Some people use the term interchangeably but they are very different. And it's important that you understand the difference between the two having more expensive than income does not mean you have a cash flow problem. So in other words it is possible for your expenses to exceed your income for any given month without you suffering from a cash flow problem. So what a cash flow problem means. It means that you do not have enough cash to cover your expenses when they come due. Even though your income exceeded your cash exceeded your expenses for that particular month. When this happens you have a cash flow problem.