Cash runway planning

Direct answer

Cash runway estimates how long available cash can cover net cash use. When net burn is positive, dividing available cash by recent monthly net burn gives a quick estimate; a dated cash forecast is better when receipts or spending will change. Show the first projected date cash falls below the business’s operating minimum, and compare it with a downside case.

The startup burn rate calculator can provide a starting estimate from two cash balances. Use the workflow below to account for collections, committed costs, and changes that the simple estimate cannot predict.

Why this question comes up

Runway matters because hiring, payment, and funding decisions take time. State the balance date, which cash is available, and the assumptions behind each scenario.

Records to gather

• Available cash across accounts, dated, with restricted funds identified
• Recent monthly net cash use and any structural changes
• Accounts receivable aging, payment history, and known disputes
• Accounts payable and any negotiated payment deferrals
• Debt schedules: principal, interest, covenants, balloon dates
• Committed future spend already signed — annual contracts, hires with start dates

Review workflow

1. Fix available starting cash. Reconcile balances as of a stated date, then remove restricted amounts and avoid counting transfers between accounts twice.
2. Choose the burn basis. Show recent net cash use and explain whether it still represents the business after hiring, price, or spending changes.
3. Add future commitments. Place signed contracts, hires, tax payments, and debt service on expected payment dates rather than relying on a trailing average.
4. Time collections. Use invoice terms alongside customer payment history and confirmed dates; identify disputed or uncertain receivables.
5. Run a downside case. Change the assumptions most likely to affect this business, such as delayed collections or slower sales, and show when the cash minimum is breached.
6. Set a decision point. Work backward from the shortfall using the lead time for a feasible response. Do not count a possible fundraise as cash until it is committed.

What a useful answer should include

• Approximate months of runway and the date available cash reaches the operating minimum or zero, if the modeled horizon reaches it
• The burn basis used, with any adjustment for a structural change explained
• A downside case with its assumptions stated, not just a single number
• Committed future spend listed separately from the trailing average
• Receivables timed using both terms and observed collections
• The decision date, and what lead time it assumes for a raise or a cut

Common failure modes

• Dividing cash by one atypical month’s burn. A simple ratio is a rough estimate, not a substitute for dated receipts and payments.
• Counting receivables as cash. A/R is a claim, not a balance. Some of it will arrive late and some will not arrive.
• Omitting committed spend. Signed contracts and accepted offers are cash obligations the trailing average has never seen.
• Reporting one number without assumptions. A base and downside case show how sensitive the result is to collections and spending.
• Waiting until cash reaches zero to act. The decision point may be earlier because financing or cost changes take time.