Gross burn describes cash outflows over a period, while net burn reflects the decrease in cash after operating inflows. Cash runway estimates how long current cash can support the modeled net outflow. A simple cash divided by net burn calculation can be useful, but it fails when collections, hiring, seasonality, one-time payments, debt, taxes, or growth plans vary by month.

VISUAL LESSON

What you will learn

  1. 01Calculate gross and net burn.
  2. 02Build a month-by-month cash runway.
  3. 03Stress-test growth decisions and timing risk.
A cash reservoir loses monthly operating expenses, receives revenue inflows, and continues along a runway timeline with scenario checkpoints
Runway is a cash-flow scenario, not a permanent date: collections, hiring, spending, and one-time items change the path.

ILLUSTRATIVE WORKED EXAMPLE

Work an illustrative runway calculation

Starting cashIllustrative balance
$600k
Monthly gross burnCash outflow
$100k
Monthly cash inflowCollections
$60k
Simple net runway$600k ÷ $40k
15 months
Illustrative example—not a benchmark. Replace every sample value with your own campaign, market, and measurement data.

PRACTICAL INTERFACE MAP

Move from cash ledger to scenario decisions

Reconcile01Build the monthly cash bridge

Record beginning cash, operating inflows and outflows, financing, investing, taxes, debt, transfers, one-time items, ending cash, currency, and bank reconciliation.

Model02Calculate burn and runway

Define gross and net burn, project collections and payments month by month, include hiring and campaign plans, and identify minimum cash and covenant constraints.

Stress-test03Run base, downside, and action cases

Vary sales timing, churn, margin, hiring, acquisition spend, receivable delay, refund or tax events, and financing; assign triggers and owners.

Conceptual walkthrough. Labels, controls, and availability can vary by account, region, plan, and interface version; verify the current screen before acting.

STEP-BY-STEP LESSON

Reconciled cash → gross and net burn → monthly runway → action triggers

ReconcileCash in and out
ProjectMonthly runway
ActGuardrails and scenarios

THE LEAD ATLAS METHOD

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01

Define the cash boundary

List bank and cash-equivalent accounts, restricted cash, currencies, transfers, debt facilities, owner contributions, taxes, payroll, payables, receivables, merchant reserves, and the legal entities included. Choose a monthly close date and base currency.

Runway should not include unavailable credit, restricted cash, uncertain financing, uncollected invoices, or assets that cannot be used without explicit assumptions. Separate operating decisions from financing events.

02

Reconcile actual cash movement

For each closed month, start with beginning cash, add customer collections and other operating inflows, subtract payroll, vendors, rent, software, marketing, taxes, refunds, debt service, and other cash outflows, then reconcile ending cash to bank evidence.

Classify one-time and recurring items, but do not remove inconvenient payments from the cash bridge. Show financing and investing flows separately so operating burn is not disguised by a capital raise or asset sale.

03

Calculate gross and net burn

Define gross burn as the agreed operating cash outflows and net burn as outflows minus eligible operating inflows for the same period. Use a representative average or trailing view when monthly volatility is material, and publish the exact formula.

If inflows exceed outflows, net burn is zero or negative under the chosen convention; a cash divided by negative burn runway is not meaningful. Shift to liquidity, reserve, and downside scenarios.

04

Build the monthly runway schedule

Project beginning cash, collections by invoice or customer cohort, recurring costs, hiring and ramp, acquisition spend, variable delivery costs, refunds, taxes, annual renewals, debt, one-time investments, minimum cash, and ending cash for every month.

The simple current-cash divided by average-net-burn formula is a quick reference, not the operating model. Identify the first month cash breaches the board-approved reserve, covenant, payroll, or safety threshold.

05

Stress-test and set triggers

Create base, downside, delayed-collections, higher-churn, lower-margin, faster-hiring, and controlled-growth cases. Tie campaign scale, hiring, vendor commitments, fundraising, and cost actions to leading indicators and cash thresholds with named owners.

Deliverable: cash-boundary memo, bank reconciliation, monthly cash bridge, gross and net burn definitions, simple reference calculation, detailed runway schedule, scenario table, minimum-cash guardrail, decision triggers, campaign and hiring limits, owners, and monthly refresh date.

THE TAKEAWAY

Reconcile actual cash first, separate gross and net burn, build a monthly runway schedule with timing and scenarios, and use predetermined cash guardrails rather than a single static runway number.

OFFICIAL REFERENCES

Check the platform’s current instructions.

Platform labels, eligibility, and workflows can change. These official help pages were used to validate this lesson.