Why it matters
Cash receipts and payments determine whether obligations can be met when due. They do not always occur when income or costs are recognised in the accounts. Customer credit, stock purchases, loan repayments and tax dates all affect timing. Looking at the movement as well as the closing balance helps explain why cash increased or fell.
A practical example
A consultancy invoices £12,000 in one month but collects it six weeks later. Wages and rent may be paid before the invoice is settled. The business can show profitable work while its available cash falls. A forecast makes that interval visible before the payments become urgent.
A common misunderstanding
Borrowed money increases bank cash but is not sales revenue. Likewise, repaying loan principal reduces cash without being the same as an operating expense. Use a profit report alongside cash information, and keep restricted funds and overdraft limits clearly identified.
General information for UK readers, updated 3 November 2026. Examples are illustrative. Tax treatment depends on the facts and current rules; seek advice before making a decision.