How cash runway works
Cash runway is calculated by dividing the current cash balance by the net burn rate. A business with $600,000 in the bank and a $100,000 monthly net burn has six months of runway, meaning it can operate for six more months without raising more money or increasing revenue. Some businesses calculate a best case and worst case runway using different burn rate assumptions to plan for uncertainty.
Runway shrinks as burn rate increases and extends as revenue grows or costs are cut, so it needs to be recalculated regularly rather than treated as a fixed number. Businesses typically start planning a fundraise or cost reduction well before runway drops below three to six months, since raising money takes time. Runway calculations become especially important heading into a board meeting or a fundraising conversation, since investors expect an accurate, current number.
Example
A company has $360,000 in cash and a net burn rate of $60,000 per month. Cash runway equals $360,000 divided by $60,000, which is 6 months. If the company cuts monthly spending so its net burn drops to $40,000, runway extends to $360,000 divided by $40,000, or 9 months, without raising any new cash.
Cash runway in QuickBooks Online vs Xero
Not software-specific: QuickBooks Online and Xero both provide the cash balance and monthly spending data needed to calculate runway, but neither tracks it as a built-in metric. It is usually calculated in a spreadsheet or a cash flow forecasting tool connected to the accounting software. Because runway depends on an accurate, current cash balance, reconciling bank accounts regularly is essential to a trustworthy runway figure.
Related terms
How LedgerBPO handles cash runway
We build and update your cash runway forecast every month, based on your actual cash balance and current spending trends. A dedicated accountant models different scenarios so you can see how a hire, a new contract, or a cost cut changes your runway. You get an early, clear signal for fundraising or budget decisions. We update the runway calculation as soon as your cash position or spending pattern changes meaningfully.