By KYN AI Advisory Team — AI implementation specialists, Singapore
Cash runway is the number of months you can operate before cash reaches zero. The formula is cash in the bank divided by net monthly burn. If you hold S$180,000 and lose S$30,000 a month, you have six months. The calculation is simple. The work is in choosing an honest burn figure, because a runway built on a single strong month will mislead you.
What is the runway formula?
Runway (months) = cash balance ÷ net monthly burn
- Cash balance is money you can spend now: bank balances, less anything restricted or owed within days.
- Net monthly burn is cash out minus cash in, per month, averaged over several months.
If a business makes money each month, burn is negative and runway is not a constraint. Many SMEs sit in between: profitable on paper, with burn that appears when a large customer pays late.
What is the difference between gross burn and net burn?
| Measure | Definition | Use it for | |---|---|---| | Gross burn | Total cash spent per month | Cost control: where does money go? | | Net burn | Cash spent minus cash received | Runway: how fast is the balance falling? |
Always compute runway from net burn. Report gross burn alongside it, because a fall in net burn caused by a one-off receipt does not mean costs fell.
Worked example
A 20-person services company.
| Month | Cash in | Cash out | Net | |---|---|---|---| | July | S$118,000 | S$152,000 | -S$34,000 | | August | S$131,000 | S$149,000 | -S$18,000 | | September | S$96,000 | S$155,000 | -S$59,000 | | Total | S$345,000 | S$456,000 | -S$111,000 |
Average net burn over three months: S$111,000 ÷ 3 = S$37,000.
Cash balance on 30 September: S$222,000.
Runway: S$222,000 ÷ S$37,000 = 6.0 months.
If you had used August alone (S$18,000), you would have claimed 12.3 months. Using the last three months removes most of that noise. The numbers here are illustrative, not from a client.
Which months should you average?
Use the last three full months as the default. Switch to six if your revenue is lumpy. Switch to twelve if your business is seasonal, and compare the same months year on year.
Do not exclude a bad month because it was "unusual". Unusual months happen every year. If you must adjust, show both figures: reported and adjusted.
What goes into cash out?
Include everything that leaves the bank, not just expenses on the P&L.
- Payroll, including employer CPF, and bonuses when paid.
- Rent and utilities.
- Supplier payments, including inventory purchases.
- GST payments to IRAS, and corporate tax instalments.
- Loan repayments, principal and interest.
- Capital purchases.
- Annual costs: insurance, software, audit fees, licences. Spread them over twelve months in a forecast, or the runway will wobble every time one lands.
Exclude transfers between your own accounts, and director loans unless they are being repaid in the period.
What goes into cash in?
Cash received, not invoices raised. A sale on credit is not burn relief until the customer pays. Count customer payments, grants received, interest, tax refunds and funding. Do not count signed but unpaid contracts.
The gap between invoicing and collecting is why receivables matter to runway. Every day you shorten the average collection time releases one day of sales as cash. A 3, 14, 30 day chase schedule is a direct runway tool.
How do you adjust for known changes?
A simple average assumes the future looks like the past. Add a forward view of three to six months with known events.
- Start from average net burn.
- Add known cost steps: a hire starting in November, a rent increase, a software renewal.
- Remove known savings: a contract ending, a loan fully repaid.
- Add expected receipts that are contracted and dated, with a delay for typical customer lateness.
- Recompute the closing cash balance month by month.
The result is a table, not a single number. Runway is the first month in which the closing balance goes below your minimum cash level.
What is the minimum cash level?
Zero is the wrong target. Set a floor equal to the amount you cannot operate below: typically one payroll cycle plus one month of fixed costs. If your payroll is S$80,000 and fixed costs are S$25,000, the floor is S$105,000. Runway to the floor is the runway that matters.
What are good runway targets?
There is no universal figure, and any source that gives one is describing a particular type of business. Use a rule of thumb that scales with how long it takes you to change course.
- If you can cut costs within one month, six months of runway to the floor is a defensible minimum.
- If you must raise money, which takes several months, start when runway is twelve months or more. A company with three months left negotiates from weakness.
- If your cash cycle is long, such as project billing every quarter, hold more.
Which mistakes make runway look better than it is?
- Counting receivables as cash. An invoice that is due next month is not in the bank until it lands.
- Using the strongest month. Averages over one month hide the late-payment months.
- Leaving out tax. GST collected is not yours. Corporate tax and instalments fall due on dates you can list in advance.
- Ignoring annual costs. An audit fee or insurance premium paid once a year can take a month of burn on its own.
- Forgetting that growth consumes cash. Hiring ahead of revenue and buying stock ahead of sales raise burn before they raise income.
Write the known annual and tax dates in a calendar once, and let the forecast read from it.
How often should you recalculate?
Monthly, at close, and weekly when runway falls under six months. Put the number on the first page of your management pack with the three inputs beside it: balance, net burn, months. Show the trend over the last six months, not the latest value alone.
How do you automate the calculation?
The inputs are available from your bank feed and your ledger. A system can:
- Pull balances from bank accounts daily.
- Classify cash movements into in, out and transfers.
- Compute three-month average net burn.
- Overlay known commitments from a schedule.
- Publish the runway figure to the people who need it, and flag when it crosses a threshold.
Item 4 is the one a person owns. Commitments such as a lease or a hire are decisions, and they belong in a schedule someone maintains. Our daily WhatsApp operations report shows how numbers like this reach a team without anyone opening a dashboard.
Where KYN fits
KYN builds finance views that run in a cloud account in your name. For a manufacturer, we built a ledger of 3,309 reconciled rows with zero duplicates and a 06:30 morning report to each department on WhatsApp, at about S$0.05 a report. A cash and runway figure fits the same pattern: a number, its inputs and a threshold alert.
The 14-day review covers your bank accounts, payables and payroll sources, since runway depends on all three. A full build ships in under 90 days. See finance systems.
Frequently asked questions
Is runway the same as cash flow?
No. Cash flow is the movement of money in a period. Runway converts that movement into time: how long the balance lasts at the current rate.
Should I include loans I could draw on?
Report two figures: runway on cash alone, and runway including committed, undrawn facilities. Never merge them. A facility can be withdrawn or have conditions attached.
What if my burn is negative?
Then cash is growing and runway is not defined. Track it anyway through a minimum-cash alert, because a large payment or a late customer can turn burn positive within a month.
Checked 30 October 2026.
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