In the world of start-ups, scale-ups and growth-oriented companies, two key figures are indispensable: cash burn and runway. They provide information on how much money the company uses each month - and how long the available Cash position will last. These figures are crucial for future planning, especially in phases with high momentum, new financing rounds or strong growth.
But not all cash burn is the same. And it does not remain constant. It is therefore all the more important to keep a regular and differentiated eye on the right figures.
What exactly does cash burn mean?
Cash burn refers to the consumption of liquid funds over a certain period of time - usually monthly. Companies that are not yet or not permanently profitable burn cash in the traditional sense in order to finance their growth.
But not every cash burn is equally meaningful. It is therefore worth taking a look at the three perspectives from which cash burn can be viewed:
1. gross cash burn - the "pure expenditure view"
The gross cash burn totals all monthly outgoing payments - regardless of income or one-off inflows. It answers the question:
"How high are my monthly obligations?"
Typically, this includes
Personnel costs
Renting and leasing
Marketing and sales expenses
Consultants, service providers & external services
General operating costs
This key figure is particularly relevant in order to realistically assess the fixed cost structure and current expenses - especially when the revenue side changes significantly.
2. net cash burn - the "true cash outflow"
The net cash burn takes into account both incoming and outgoing payments. It is therefore the actual balance of cash flows.
Income - expenses = net cash burn
This perspective shows how much money is really being lost - and when a company may even start to build up aCash position , for example through rising sales or falling costs.
3. total cash burn - the complete balance sheet of the Cash position
The total cash burn also includes one-off or extraordinary effects - such as financing rounds, subsidies or loans. It shows the absolute change in the account balance over a defined period.
A one-off inflow of capital can make the total cash burn appear positive - even if operating losses continue to be incurred.
This perspective is ideal for seeing how the overall Cash position is developing, independently of the operating business.
What is the runway - and why is it so important?
The runway indicates how many months a company can still operate with the currently available liquid funds while maintaining the same cash burn.
Example: With an account balance of €100,000 and a net cash burn of -€20,000/month, this results in a runway of 5 months.
Runway is one of the key performance indicators in discussions with investors - but also in internal controlling. It creates transparency as to when new financing is required or what measures need to be taken to avoid liquidity bottlenecks.
Why cash burn changes over time
Cash burn is not a static figure - it is dynamic. New employees, marketing campaigns, changes in revenue streams or crises (e.g. supply bottlenecks, economic uncertainties) can have a massive impact on the key figures.
It is therefore not enough to look at cash burn once a quarter. Anyone who takes their financial planning seriously should monitor it regularly:
How expenditure is developing
Which revenues are actually realized
Whether measures are effective (e.g. cost reductions, new customers, subsidies)
How COMMITLY analyzes the cash burn - in four temporal perspectives
To make this dynamic tangible, COMMITLY Cash Burn and Runway calculates on four different time levels - giving you a holistic view of your liquidity development:
Average of the last 6 months
A stable, smoothed value - ideal for strategic analyses and communication with investors.
Shows the long-term trend and helps to realistically classify the development.
Average of the last 3 months
A more focused look at current changes in cash flow.
Recognizable: incipient cost increases or slumps in sales.
Last month
The actual value - unembellished and concrete.
Ideal for identifying outliers, special effects or short-term changes.
Average of the next 3 months (forecast)
Based on your forecast in COMMITLY - forward-looking planning.
Shows where the cash burn will develop if planned measures or expected sales occur.
What users can learn from this
These four perspectives not only show you how high your current cash burn is, but also how high it is:
Whether your financial situation improves or deteriorates
Whether planned measures are effective
How long your funds will last with varying development
When you should act proactively - and not when it's too late
Conclusion: Cash burn and runway - clarity instead of uncertainty
Cash burn is more than just a number. It is an early warning system, a decision-making tool and a key indicator of financial health. And it is dynamic - which is why we need a system that makes this change visible.
COMMITLY provides you with this transparency - in real time, over several time periods and always with an eye on the essentials: the future of your company.
