Metric guide · Cash and margin
Net burn
Short answer
Net burn is the amount of cash a company loses in a month after counting the money it brings in. It is calculated as cash spent on operations in the month minus cash received from customers. Gross burn is the spending alone. Financing inflows, such as new equity or loans, are left out.
The formula
Net burn = operating cash out − operating cash in, per month
Unit: US dollars. Better when it goes down.
Enter cash and net burn to see months left and the month cash runs out, with burn growth.
Open the calculatorHow to calculate it
- Pull total operating spending for the month from your accounting system or bank records.
- Pull cash received from customers for the same month.
- Subtract cash received from spending. Exclude equity raised, loan proceeds and transfers between your own accounts.
- Average the last three months if single months swing because of annual bills or prepayments.
Mistakes that distort it
A falling balance includes loan repayments and transfers, and a rising one can come from new funding. Burn should reflect operations only.
Burn from your books records costs when they are incurred. Burn from your bank records money when it leaves. The two diverge around annual contracts and payment terms. State which one you report.
Annual software renewals, insurance or a batch of annual subscription payments can move a single month sharply. Look at a trailing average as well.
Where Sondola reads it from
Sondola reads net burn two ways: Net burn, books from whichever of QuickBooks Online and Xero keeps your books, and Net burn, bank from Mercury. Each reading shows its source and period. Each reading keeps where it came from, the period and the date it was recorded, and you can download all of it at any time.
See all 34 integrations →Questions
What is the difference between gross burn and net burn?
Gross burn is total operating spending in a month. Net burn subtracts cash received from customers, so it shows how quickly cash on hand is actually falling.
Should net burn be positive or negative?
By convention, net burn is reported as a positive number when the company is losing cash. A company that takes in more than it spends has no net burn.
Related metrics
Written by the Sondola team. Benchmarks name their source, basis and date. Changes to how Sondola counts a number are on the corrections page.
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