The date of a cash shortfall matters more than a rounded number of months on a board slide.
Start with cash that is available
A simple runway calculation divides available cash by monthly net cash outflow. It is a starting point, not a forecast. Exclude money that cannot be used for ordinary operations and separate a signed sale from a collected payment. A startup can look healthy on a revenue chart while waiting for customers to pay the invoices that fund its next payroll.
Make timing visible
Build a week-by-week cash calendar for the near term and a monthly view beyond it. Put payroll, tax payments, annual software bills and inventory purchases on their actual expected dates. In a hypothetical company with $300,000 available and $30,000 of monthly net outflow, the simple calculation gives ten months. An immediate $90,000 equipment purchase changes that picture before any new hiring decision.
A practical cash review
Balance
Start with usable cash.
Calendar
Place receipts and bills on dates.
Scenarios
Test slower collections and new commitments.
Decide
Act before the forecast becomes a crisis.
Model decisions rather than optimism
Use a base case grounded in current collections and a downside case with slower receipts or weaker sales. Give each discretionary expense an owner and a decision date. The question is not whether every forecast will be right; it is whether the team will notice a deviation early enough to respond. A fundraising conversation should be a scenario, not a guaranteed cash receipt.
Review the forecast against the bank
Each week, reconcile forecast cash with actual balances and explain the largest differences. Repeated timing errors reveal more than a polished model with many tabs. Keep a short list of actions that extend useful operating time without destroying customer delivery. The purpose is to preserve choices: when cash is visible, a founder can adjust hiring, collections or purchasing before an urgent deadline forces a worse decision.
Sources
- Y Combinator — source and reference material ↗ Y Combinator · Primary source
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