Cash Runway: 100% confidence with automated runway reporting

Cash runway is a must-have cash KPI for a CEO, especially now, in a time of higher Euribor rates. Cash runway tells how many months a company can continue to run businesses without running out of cash. 

The higher the uncertainty, the longer the cash runway.

The cash runway depends on the company's sales, spending, and plans, like investments. The targeted runway depends on the company's ability to cover cash-out with cash-in from sales. As a rule of thumb, a cash runway over 12 months is good, while a runway of less than six months is risky. The targeted runway depends on the company's ability to cover cash-out (expenses or plans) with cash-in from sales. The higher the uncertainty, the longer the targeted runway. For a startup or scaleup, if your product is not ready yet to generate sales at the same time when your staff costs are high, it's critical to ensure that the cash runway is long enough to close the funding round. For an established company, the cash runway can be temporarily very short, for example, after profit distribution, if the company can generate cash from sales. But, due to payback times, the runway typically starts to be critical if you make investments.

The longer the cash runway, the more time the CEO and her/his team have time to adjust the operations. The first action to extend the runway is to get more cash in and generate more sales, and the second is to cut cash out, meaning spending. The third on the list is to start funding negotiations, whether with a bank or investors.

Cash runway is a forecast.

Cash runway is a forecast. With riskrate, you can get your cash runway and forecast report with a click. The advantage of automation is 100% confidence on the runway, which is rule number one to keep your business running. 

Cash runway is usually calculated by dividing the total cash on bank accounts by the company's monthly forecasted net cash flow. The net cash flow is the difference between cash in (on sales) and cash out (on spending, like salaries, loan repayments, materials, rents, taxes, etc.) The cash runway calculation assumes your company will not receive additional funding during the specified period.

How can automation tackle Runway pitfalls?

Riskate automation easily tackles potential pitfalls affecting the accuracy of your runway.

Accuracy of cash burn or spending when expenses fluctuate Forecasting the monthly spending can be challenging, especially if your company has fluctuating expenses or irregular revenue streams. In this case, it's time-consuming to analyze historical financial data to forecast future spending and revenue accurately. With riskrate automation, you can get an accurate net cash burn forecast for the next 12 months that considers the differences between your fixed and variable costs, leading to a precise cash runway today. You can edit your automated forecast to see how your plans affect your runway if needed.

Forecasting net cash flow for the next 12 months, considering business trends Forecasting future net cash flow for the next 12 months is time-consuming, as it should consider business trends and seasonal variations. Changes in these factors can impact the company's cash runway. With riskrate automation, you can get an accurate net cash burn forecast for the next 12 months that considers the differences between your fixed and variable costs, leading to a precise cash runway today. If needed, you can edit your automated forecast.

It's good to remember that unexpected expenses or revenue shortfalls should be accounted for in the cash runway calculation. Because of this, you can edit your automated forecast to see how your plans affect your runway if needed.

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