Cash inflow is a term used to describe any and all funds received by an organization as a result of its activities. The inflow may be primarily due to any goods or services that are sold to consumers, but can also include returns on investment activities conducted by a business or other type of organization, as well as any lending or financing activities that the organization may offer. Essentially, just about any type of income to the organization can be identified as cash inflow.
Depending on the type of organization involved, there is usually some primary source of cash inflow that is augmented by one or more ancillary sources of income. Businesses usually receive the bulk of the influx of cash from selling products to consumers, invoicing those orders, and then receiving payments for those purchases. At the same time, a business may also use some of its resources to invest in other companies, either by the purchase of bond issues or shares of stock. There is even the possibility that a business may choose to finance a venture of some sort, possibly in the form of a loan. When this is the case, the interest earned from the loan is considered to be cash inflow.
Other types of organizations may rely on cash inflow of a different type. Non-profit organizations such as charities and religious organizations often rely on pledges and open donations as main sources of this type of inflow. Often, those organizations may invest in various types of securities as a means of generating additional sources of income that provide support that is in addition to the donations. As a result of responsible investing, the organization is able to use a portion of those donations for ongoing operations while also magnifying the usefulness of donations by using a portion to create enduring sources of income that aid in allowing the charity or other organization to keep operating in the future.
Cash inflow is the opposite of what is known as cash outflow. While inflow has to do with any sources of income or revenue that are received by the organization, cash outflow involves all expenses that are paid by the entity, such as buying new equipment or paying the costs associated with day-to-day operations. Typically, the accounting process used by any organization will seek to maintain a balance between cash inflow and outflow, making sure the entity does not become delinquent in its obligations by adapting its spending habits to remain within the limits of the influx of cash.
