What does startup cash flow track and why is it important?

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Cash flow shows when cash actually enters and leaves the business over time, not just how much profit the business reports. For a startup, this timing matters because you can be profitable on paper while running out of cash if receipts from customers come in slowly or if you must pay salaries, suppliers, and other bills before you’ve collected enough cash. Tracking inflows and outflows month by month reveals your runway—the amount of time you can operate before needing more cash—and helps you spot gaps so you can plan financing, adjust spending, or pace hiring and inventory. It’s different from net income, which includes non-cash items and accruals; cash flow focuses on real cash movement. Relying only on cash on hand ignores future timing, which can leave you short if inflows slow down. In short, cash flow matters because it shows the actual availability of cash over time and helps you prevent operations from stalling due to cash shortages.