Revenue does not pay the bills until it is collected.
Gross burn measures operating cash paid during a period. Net burn subtracts operating collections from those payments. A company can report rising revenue while consuming more cash if customers take longer to pay.
Keep financing and operating movements separate. Investment proceeds replenish cash but do not improve operating burn. Use the same period for both inputs and review exceptional payments before treating one month as representative.
The formula, made clear.
- Gross burn
- All operating cash outflows in the month, before collections.
- Net burn
- A positive value consumes cash; a negative value generates cash.
Put the numbers in context.
$120,000.00 paid less $40,000.00 collected gives $80,000.00 monthly net burn. Gross burn remains $120,000.00.
| Input | Example value |
|---|---|
| Monthly operating payments | $120,000.00 |
| Monthly operating collections | $40,000.00 |
| Monthly net burn | $80,000.00 |
What this calculation assumes
A monthly operating cash measure. This is not EBITDA or net income. Financing, asset sales and non-operating cash movements are excluded; classification must be consistent across periods.
What to consider next.
Use net burn with unrestricted cash to estimate runway. For growth companies, compare the same-period cash consumption with net new ARR.
How we approach financial models →