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What is net cash flow?

Understanding net cash flow and how to calculate it.

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Net Cash Flow is the difference between the cash coming into a business and the cash going out of a business during a specific period of time and this is the net cash flow from 3 different areas.

The cash involved in the operation of the business including cash coming in from sales of services and/or products and cash going out from rent, wages, marketing and bills.

The cash involved in financing a business including outgoing cost of paying off debt, cash to shareholders and dividend payouts plus money incoming from borrowing or the issuing of equity

The cash involved in Investment activities including money incoming from investments or sale of an asset and money paid out for investments including the purchase of equipment or assets.

How do you calculate net cash flow?

Net cash flow is calculated by subtracting outgoing cash flow from incoming cash flow over a specific period of time.

Net Cash Flow = Incoming cash (Operating, Financial, Investment) – Outgoing cash (Operating, Financial, Investment)

Net Cash Flow = CFO + CFF + CFI

Where CFO = Net Cash Flow from Operating Activities

           CFF = Net Cash Flow from Financing Activities

           CFI = Net Cash Flow from Investing Activities

Why is understanding net cash flow important?

It is essential to have cash in a business to ensure its day to day running costs are covered, if you cannot meet your bills you could quickly go out of business even if over a longer period of time your business is profitable.

However a positive net cash flow is not necessarily a good thing and a negative net cash flow necessarily a bad thing; it all depends on where the cash has come from or where it is going to.

Keeping a track on cash flow, whether it is positive or negative, over a particular period of time is very important in understanding how your business is managing and will manage in the future. It enables you to follow the flow of cash and identify periods when incoming/outgoing costs are higher or lower. This could be crucial when planning, in particular when decisions will involve cash coming into or leaving the business. Making sure you are not short of cash in your business for any period of time could be the key to your success.

Cash Flow is also important information for lenders and potential investors to see. A positive cash flow is important as they will be concerned about receiving repayment of a loan or a return on their investment.


What are the limitations of net cash flow?

There are various limitations of net cash flow, which include:

    • The cash flow figure alone does not show the profitability of a company, just the cash available in a specific period
    • Positive cash flow from a loan that needs repaying may not be positive for the business and negative cash flow from a investment that could reap future rewards may not be negative therefore care is needed to see the bigger picture
    • The net cash flow figure is historical and therefore unable to be used to forecast future cash flows
    • This can make it hard to assess a company’s liabilities accurately from this figure alone
    • Net cash flow should be taken as only one part of an overall picture when assessing the health of a business

  • Have you thought about Invoice Finance as a cash flow solution for your business?

    Invoice finance allows you to release cash quickly from your unpaid invoices.

    As your lender, we can release up to 90% of your invoices within 24 hours. On payment of the invoice from your customers, we will then release the final amount minus any fees and charges. There are different types of invoice financing options available to businesses depending on the situation and the level of control they require in collecting unpaid invoices.

    We are an invoice financing company who offer a solution whereby payments are collected on your behalf managed by our team of expert credit controllers so you can focus on running your business. Our Confidential Invoice Discounting solution is offered to businesses who want to maintain their own credit control processes, therefore this remains strictly confidential so your customers are unaware of our involvement.

    The benefits of invoice finance companies such as Hitachi Capital
      • Boost your cashflow without having to wait up to 120 days for your customers to pay you
      • An invoice finance company with a revolutionary digital onboarding process, giving you quicker access to funds and the ability to take on new business remotely during this lockdown period
      • Release up to 90% of the invoice straight away, and the final 10% when the invoice is settled
      • No need to chase your invoices, we can do it for you
      • 6 month trial period followed by a rolling contract

Get a quote online or call 0808 250 0859

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We have revolutionised cash flow finance with our digital onboarding process

We are an award winning cash flow finance company

Best Invoice Finance Service 2021

Highly Commended Factoring Provider 2021

Best Invoice Finance Provider 2020


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Please note that costs are an estimate only and are based on the entered values. Your final quote may change once a Business Development Manager has assessed your business in more detail.

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Why choose Hitachi Capital Invoice Finance as an alternative to a Business Loan

      • A 6 month trial period so you can be sure the product is right for you
      • Followed by a 6 month rolling contract – we don’t tie our clients in for long periods
      • A one fee solution with no hidden fees
      • Award-winning client service by our team of expert Client Managers
      • Our Relationship Management team are in the field to visit you in person
      • We are part of Hitachi Capital (UK) PLC, a company that is going from strength to strength – we’re here for the long term.

Smarter, Faster and Simpler Cashflow Finance with Hitachi Capital

Smarter, Faster and Simpler Cashflow Finance with Hitachi Capital

Smarter, Faster and Simpler Cashflow Finance with Hitachi Capital

Find out how we are revolutionising the way UK SME's access cashflow finance.

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