How burn rate works
Gross burn rate is simply total cash spent in a month. Net burn rate subtracts any cash coming in from revenue, so it reflects the actual monthly decline in the cash balance. Net burn is the number most businesses watch closely, since it directly determines how long the cash on hand will last. Burn rate is usually reviewed alongside revenue growth, since a high burn rate can be reasonable if revenue is growing quickly enough to match it.
Burn rate is tracked alongside cash balance to calculate cash runway, and it becomes especially important around fundraising or budgeting decisions. A rising burn rate without a matching rise in revenue or a clear growth plan is usually a warning sign that spending needs to be reviewed. Investors evaluating a startup often compare burn rate against the pace of revenue growth to judge whether the spending is actually paying off.
Example
A startup starts the month with $500,000 in the bank, spends $180,000 on payroll and operating costs, and brings in $50,000 in revenue. Net burn rate equals $180,000 minus $50,000, which is $130,000 for the month. At that pace, the $500,000 balance would last about 3.8 months if nothing changed.
Burn rate in QuickBooks Online vs Xero
Not software-specific: QuickBooks Online and Xero both provide the monthly cash inflow and outflow data needed to calculate burn rate through the Profit and loss and cash flow reports. Neither platform labels a burn rate metric directly, so it is usually tracked in a spreadsheet or a connected dashboard tool. Because burn rate depends on accurate categorization of spending, miscoded transactions can make the monthly figure misleading.
Related terms
How LedgerBPO handles burn rate
We track your monthly burn rate as part of ongoing financial reporting, so you always know how fast cash is moving out the door. A dedicated accountant flags any unexpected jump in spending before it affects your runway. You get an early, accurate signal when it is time to adjust budget or plan a raise. We break burn rate down by category, like payroll and marketing, so you can see exactly where cash is going.