What does it mean to have a negative cash flow?

Having a negative cash flow means that during a specific period, a business's expenses surpass its revenues. This situation indicates that the company is spending more money than it brings in through its sales or other income sources. Negative cash flow can be concerning for a business, as it implies that the company may struggle to meet its financial obligations, pay suppliers, or invest in future growth without additional funding.

In small business finance management, monitoring cash flow is crucial because consistent negative cash flow can lead to financial instability. It's important for business owners to analyze the reasons behind negative cash flow, which could stem from various factors such as declining sales, increased operational costs, or poor cash management practices. Understanding and addressing these issues is essential for maintaining the health of the business.