The cash flow formula
Net cash flow = cash in − cash out
Ending cash = starting cash + net cash flow
Runway, when net cash flow is negative = starting cash ÷ the monthly shortfall
Example: you start the month with $60,000. Customers pay you $42,000, and $46,000 goes out on payroll, rent, suppliers, marketing, software and a loan payment. Your net cash flow is −$4,000 and you end the month with $56,000. If every month looked like this one, your cash would last 15 months.
Cash flow is not profit
Profit is what your books say you earned. Cash flow is the money that actually moved through your bank account. The two drift apart all the time: a customer pays 60 days late, you buy stock before you sell it, or a loan payment goes out that never shows up as an expense. A business can be profitable and still run out of cash. This cash flow calculator keeps your eyes on the bank balance.
How to use it
Start with the cash in your account at the start of the month. List what came in, mostly customer payments, and what went out: payroll, rent, suppliers, marketing, software, loan payments and taxes. Rename the rows, delete the ones you don’t need or add your own. The results update as you type.
When more goes out than comes in
One negative month isn’t a crisis. A string of them is. When cash flow is negative, the calculator shows how many months your cash lasts at that pace. That’s how long you have to fix it: collect faster, cut a cost, raise prices or line up funding.
FAQs
How do you calculate cash flow?
Add up the cash that came in during the month, then subtract the cash that went out. Count money when it moves, not when you send an invoice or get a bill. $42,000 in and $46,000 out is a net cash flow of −$4,000.
What is a good cash flow amount?
Positive, first of all: more cash coming in than going out, month after month. Beyond that, it depends on how big a cushion you keep in the bank for a bad month. My Startup Cost Calculator suggests six months of monthly costs as a reserve. It’s not a rule, but it’s a solid place to start.
Can you explain cash flow in a simple way?
Cash flow is the money moving in and out of your bank account. Cash in is what customers, lenders and investors pay you. Cash out is everything you pay: wages, rent, suppliers, loan payments, taxes. If more comes in than goes out, your cash flow is positive. If more goes out, it’s negative, and you’re living off the cash you have.
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