How it works
- Cash runway
- Cash runway is the number of months your current cash would last if money in and money out stayed at their recent averages.
The calculator subtracts average monthly cash out from average monthly cash in to get your net burn, then divides cash on hand by that burn. If more comes in than goes out, there is no burn and the result says so.
- Net burn = cash out per month − cash in per month
- Runway (months) = cash on hand ÷ net burn
- Runway (weeks) = months × 4.33
Using the number well
Use cash figures from your bank, not sales or expenses from the income statement. A profitable month can still burn cash if customers pay late or you bought inventory.
Averages hide timing. Payroll, HST remittances, annual insurance and seasonal sales all land on specific weeks. A 13-week cash forecast shows the actual low point, which is usually earlier than an average suggests.
If runway is under six months, the conversation to have is about collections, spending and financing, in that order.
Questions
What is a healthy cash runway for a small business?
There is no single rule. Many owner-managed businesses aim to hold enough cash to cover several months of fixed costs, more if revenue is seasonal or concentrated in a few customers. The right buffer depends on how predictable your cash in is.
Should I use profit or cash for this calculator?
Cash. Profit includes sales you have invoiced but not collected and costs you have not paid yet. Runway is about the bank balance, so use what actually moved through the bank.
What if my business is cash-positive?
Then you have no burn and no runway limit at current averages. It is still worth forecasting week by week, because a single large payment or slow customer can create a short-term gap.
General information, not advice for your situation. Results are only as good as the numbers you enter.