Definition
Cash outflow is the opposite of cash inflow. It is the net cash that has gone out of a business towards various payments made during a period.
Example
Cash outflow could be money spent toward fixed assets, employee salaries, payments to suppliers, interest paid on borrowings, and more.
Why it matters
Cash outflow is an important financial number to track, especially in the context of cash inflows. If outflows are higher than inflows, it means the business will have negative cash flows and this can be damaging in the long run. Cash flow can be a challenge for small businesses. Therefore, balancing inflows and outflows of cash can allow smooth day-to-day functioning while gathering sufficient reserves to deal with sales cycles or unexpected expenses.