How to Calculate Your Cash Runway and Give Your Business More Time

How long could your business keep going with the cash it has today?

That is the question cash runway helps you answer. If more money leaves your business than comes in, runway estimates how many months your available cash will last.

You do not need a finance background to work it out. Start with your bank balance, check the cash coming in and going out, and use the result to plan your next steps. The examples below use US dollars, but the same method works in any currency.

1. Understand cash burn

Cash burn means your business is using up its cash. There are two useful ways to measure it.

Gross burn is the total cash you pay to run the business each month, before counting money received from customers.

Imagine your monthly payments are $45,000 for salaries, $12,000 for software, $6,000 for premises, and $7,000 for marketing. Your gross burn is $70,000.

Net burn is what your business uses up after allowing for cash received from customers and other regular business activities.

Net burn = Cash paid to run the business - Cash received from operations

If you pay out $70,000 and collect $25,000, your net burn is $45,000 for that month.

Count money received, not just sales invoices sent. A $25,000 invoice does not help you pay this week's wages if the customer pays next month.

Keep money from loans and investors separate. It adds cash to the bank, but it does not mean the business itself is bringing in more than it spends. Include equipment purchases, loan repayments, taxes, and other payments in your full cash plan so nothing is missed.

2. Calculate how long your cash will last

Cash runway in months = Cash available to use / Expected monthly net cash burn

Suppose you have $450,000 available and expect to use up $45,000 each month.

$450,000 / $45,000 = 10 months of runway

This is an estimate. It assumes your monthly cash needs stay the same and that you have included all regular payments. Large extra payments can shorten it.

Use cash your business is allowed to spend. For example, a deposit you must hold for someone else may appear in the bank but may not be available to pay your bills.

Also choose a minimum cash buffer: an amount you want to keep available for essential payments and surprises.

With a $90,000 buffer, you have $360,000 above that amount. At $45,000 a month, you would reach the buffer in 8 months, even though cash would reach zero in 10 months. Your buffer should fit your business.

If your business receives as much cash as it pays out, or more, the formula does not give a useful countdown. Keep planning ahead because a large bill or late customer payment could still create a shortfall.

3. Make a cash plan for the months ahead

Looking at the last three months can give you a starting point. But an average of past spending cannot tell you exactly what happens next.

Build a month-by-month cash forecast. This simply means writing down the money you expect to receive and pay, and when you expect it to move. Start with the next 12 months and extend the plan to cover important business milestones.

Cash at the end of the month = Starting cash + Money received - Money paid out

Carry each month's ending balance into the next month. Include customer payments, wages, rent, taxes, annual subscriptions, equipment, and loan repayments. Show any new funding separately. Do not assume an investor will pay until the funding is sufficiently certain; keep unconfirmed investment out of your main plan.

Test three versions: what you realistically expect, what happens if sales are lower or customers pay later, and what happens if results improve. Pay attention to the first date cash drops below your buffer. That is an early signal to act.

4. Avoid four common cash traps

• Customer payments received upfront. A customer paying $120,000 for a year improves cash today. You still need to pay the costs of delivering that year's service and allow for any refund obligations. Do not assume that payment arrives every month.
• Bills you have not paid yet. Supplier invoices, taxes, and loan installments may still be sitting outside your bank balance. Include them in the week or month they must be paid. Count each payment once.
• Sales that have not turned into cash. A business can show a profit and still struggle to pay wages. Use realistic customer payment dates, including the delays you actually experience.
• Unusual cash movements. New investment can hide ongoing cash burn. Buying equipment can make one month look unusually expensive. Show everyday business activity and unusual items separately, then check that the total matches your bank movements.

5. Decide when to act

There is no single safe runway for every business. A company with reliable monthly payments has different needs from one relying on a few large customers. Use these as planning signals, not fixed rules.

• More than 12 months: Review cash monthly, check what could go wrong, and connect new spending to clear business goals.
• 6 to 12 months: Review commitments more closely. Plan how you will cover costs from customer cash or secure funding in time. An investor's term sheet is not money in the bank.
• Under 6 months: Review cash at least weekly. Give someone responsibility for each action and prioritize essential payments and work that protects viable sales. Get professional advice promptly if paying your obligations is becoming uncertain.

Act sooner if your forecast shows a payment shortfall. Waiting for a particular runway number can leave too little time.

6. Give your business more time

• Get paid sooner. Send invoices promptly, fix disputes, follow up overdue payments, and agree suitable deposits or staged payments for larger projects. Discuss changes to existing payment terms with customers.
• Check the cost of upfront discounts. Charging $1,000 a month would bring in $12,000 over a year. A 15% discount for paying upfront brings in $10,200 now, but gives up $1,800 in revenue. Make sure the earlier cash is worth that cost and leaves enough to deliver the service.
• Remove spending you do not need. Review unused software, duplicate subscriptions, and activities producing weak results. Protect essential delivery and customer service. An annual software plan may be cheaper overall but use more cash today.
• Keep more from each sale. Review prices and the costs of providing your products or services. Extra sales help only if enough cash remains after paying the extra costs of serving those customers.
• Stage new spending. Delay nonessential equipment and link hiring to clear demand. Contractors can offer flexibility, but contracts may still include notice periods and minimum payments.
• Talk to suppliers early. Discuss payment schedules, service levels, and discounts. Agree changes rather than simply paying late. Check whether a discount requires more cash upfront.

7. See the difference a few changes can make

Return to the business with $450,000 available and $45,000 monthly net burn.

It cuts $5,000 of unnecessary monthly spending and brings in an extra $5,000 of monthly cash after paying the extra costs of those sales.

New monthly net burn = $45,000 - $5,000 - $5,000 = $35,000

New estimated runway = $450,000 / $35,000 = 12.9 months

That gives the business about 2.9 additional months. With the same $90,000 buffer, time before reaching the buffer rises from 8 months to about 10.3 months.

These figures assume the improvements start immediately and continue. Your own plan should include any setup costs and delays. Collecting an overdue invoice adds cash once. Canceling an unnecessary monthly subscription saves cash repeatedly.

8. Check the next 13 weeks

A monthly plan can hide a difficult week. Payroll might be due on Friday while a large customer payment is not expected until the following Tuesday.

A rolling 13-week cash forecast is a weekly cash plan for roughly the next three months. It helps whenever cash timing is tight or uncertain.

For each week, record your starting cash, money expected in, money expected out, ending cash, and the amount left above your buffer. Include all payments and use realistic dates.

Update the plan every week with what actually happened, explain significant differences, and add a new week at the end. Keep your monthly plan for the longer view. BDC also recommends updating a rolling 13-week forecast weekly to improve cash visibility.

9. Your next seven days

• Day 1: Check your bank balances, identify cash you cannot use, and choose a minimum buffer.
• Day 2: Calculate recent gross and net burn. Separate loans, investment, and unusual payments.
• Day 3: Build your 13-week cash plan.
• Day 4: Follow up the largest overdue or disputed customer invoices.
• Day 5: Review subscriptions and planned spending. Give each action an owner and deadline.
• Day 6: Test what happens if sales slow or customers pay later.
• Day 7: Agree your next steps and book a weekly cash review.

Turn your runway number into a decision

Knowing how long your cash could last gives you time to make changes. Start with one practical action this week: collect a payment sooner, remove an unnecessary cost, or improve the cash you keep from each sale. Then update the plan as your business changes.

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Further reading

• BDC: Plan your cash flow in the coming year
  https://www.bdc.ca/en/articles-tools/money-finance/manage-finances/making-projection-coming-year
• Stripe Atlas: Business banking solutions for optimal cash management
  https://stripe.com/guides/atlas/business-banking-solutions-for-optimal-cash-management

All examples are illustrative. Adapt the plan to your business and its obligations.