Runway changes when your cash flows change.
A constant-burn runway is a useful starting point, but a business rarely stays at the same spending and collection rate. This monthly model compounds each flow separately and tracks the lowest month-end balance.
The required financing is the amount of opening cash needed to keep every modeled month-end at or above the chosen reserve. A later recovery does not erase an earlier funding gap. Negative balances show unfunded requirements, not an ability to spend without cash.
The formula, made clear.
- Funding gap
- max(0, required reserve − lowest modeled balance), including opening cash.
- Cash-out month
- First month-end at or below zero; intramonth timing is excluded.
Put the numbers in context.
With $1,000,000.00 opening cash, $40,000.00 collections and $100,000.00 payments, month one closes at $940,000.00. Growth applies from month two onward.
| Input | Example value |
|---|---|
| Opening cash | $1,000,000.00 |
| Month-one payments | $100,000.00 |
| Month-one collections | $40,000.00 |
| Monthly payment growth | 2% |
| Monthly collection growth | 5% |
| Forecast horizon | 24 months |
| Required cash floor | $100,000.00 |
| Immediate operating cash adjustment | $0.00 |
| Opening financing to preserve the reserve | $362,106.29 |
What this calculation assumes
End-of-month recurring movements and constant growth assumptions, no financing inflows. A separate one-off operating adjustment is assumed realized immediately before month one; do not also include it in recurring flows. Adjusted opening cash is included in the minimum balance. A gradual collections change requires a timed operating plan. Growth rates are scenarios, not forecasts of customer behavior.
What to consider next.
Review the month-by-month balances and rerun a downside collection scenario. Add the financing requirement to the dilution model.
How we approach financial models →