Personal Finance Cash Flow Analogy

Without business-related accounting experience, it sometimes can be difficult to understand the relationship between cash flow and net income, and the need for prudent managers to think about both. Your personal finances can provide an interesting analogy. Clearly, we can continue to get "cash flow" from credit cards, in the form of purchases and cash advances, but without earnings (i.e., net income) one won't be able to pay even the minimum payment on the credit card loans, which would be an outflow of cash. If you were to maintain your check book on Quicken (or use QuickBooks as overkill), this relationship between income earned and cash received would be obvious. Still, one could earn money by working for a business, but without the receipt of payment for that work, cash is not realized. Hence, net income is important but cash flow is a necessity as well.