Subtract a protected reserve from starting cash, project recurring net cash flow month by month, place known one-time cash events in the month they occur, and record the first month ending cash reaches the reserve. Repeat with lower receipts and higher outflows.
Define cash that is truly available
Use cash the business can access now. Exclude restricted funds and money already committed to payroll, sales tax, payroll tax, trust obligations, deposits, debt payments, or owner needs that cannot be postponed. Set a reserve floor for the minimum operating cushion you are unwilling to cross.
A reserve is an owner-selected safety boundary, not a universal percentage. Its size should reflect payroll timing, seasonality, collection risk, inventory needs, debt, taxes, and how quickly the business can reduce spending or add cash.
Use cash timing rather than accounting profit
Record customer cash when it is expected to arrive and supplier, payroll, tax, rent, debt, and owner cash when each is expected to leave. A profitable sale can consume cash first and collect later.
The U.S. Small Business Administration's finance guidance distinguishes cash and accrual accounting and recommends maintaining proper bookkeeping. Reconcile planning inputs to bank activity, receivables, payables, payroll, and the accounting records rather than relying on memory.
Monthly burn = the amount by which outflows exceed receipts
Place known one-time events in the right month
Taxes, insurance renewals, annual subscriptions, equipment deposits, legal bills, owner capital, loan proceeds, and delayed customer payments can change the breach month. Enter known events separately rather than smoothing them into a monthly average.
Treat uncertain inflows cautiously. A possible loan, investment, or late receivable is not cash until its timing and availability are supportable. Run one case without it.
Walk through the default example
| Input or result | Default example | Decision meaning |
|---|---|---|
| Starting cash | $60,000 | Cash available now |
| Protected reserve | $15,000 | Floor the plan should not cross |
| Monthly receipts and outflows | $30,000 and $38,000 | $8,000 monthly base burn |
| One-time outflow | $8,000 in month 3 | Known event placed when due |
| Base reserve breach | Month 5 | Four full months end above reserve |
| Stress reserve breach | Month 3 | Receipts −15%; outflows +10% |
The two-month difference matters. If corrective action takes eight weeks to affect cash, waiting for the base case leaves almost no room when the weaker case occurs.
Turn the breach month into action dates
Work backward from the stressed breach. Allow time for price changes, collections, cost reductions, financing, owner capital, or an orderly shutdown to produce cash. Set trigger points while options remain.
- Weekly cash review begins on a named date.
- Discretionary spending stops at a defined cash balance.
- Receivables follow-up and deposit requirements tighten.
- Financing or capital conversations start before a crisis.
- Hiring, inventory, and owner distributions follow explicit gates.
Know what this runway estimate leaves out
The calculator uses one recurring monthly amount and month-end cash movements. It does not model weekly payroll timing, every invoice, credit availability, covenant limits, legal restrictions, or insolvency rules. A business with tight cash timing needs a rolling 13-week forecast reviewed against actual results.
This guide is educational planning information, not accounting, tax, legal, insolvency, lending, or financial advice.