"How much runway do we have?" deserves a better answer than cash divided by last month's burn. That shortcut ignores annual prepayments, payroll timing, tax payments and the collections you are counting on. Two tools give a defensible answer: a rolling 13-week cash forecast for the near term and a monthly operating model for the long term.
The 13-week forecast
A direct-method forecast: actual cash in and cash out, week by week.
| Section | Lines |
|---|---|
| Opening cash | Bank balances, by account |
| Receipts | Collections by customer (from open AR and expected renewals), other inflows |
| Disbursements | Payroll and taxes, rent, hosting, software, contractors, vendor bills by due date, tax payments, debt service |
| Net cash flow | Receipts less disbursements |
| Closing cash | Opening cash plus net cash flow |
| Minimum cash line | The floor you will not go below |
Build it from source documents: the AR aging, the AP aging, the payroll calendar and the contract renewal list. Then roll it every week: drop the week that passed, add a new week thirteen, and compare forecast to actual.
The monthly model behind runway
The 13-week view stops at a quarter. Runway needs the operating model: revenue by ARR cohort, hiring plan, gross margin and operating expenses, converted to cash with your billing terms. Runway is the month the projected balance crosses your minimum cash line, not the month it hits zero.
Common mistakes
- Treating annual billings as monthly cash. A January renewal season fills the bank account once; spreading it evenly overstates mid-year cash.
- Forgetting non-payroll payroll costs. Employer taxes, benefits and bonuses follow different calendars than salaries.
- Ignoring tax payments. Estimated taxes, sales tax remittances and the Delaware franchise tax all leave the account on fixed dates.
- Counting on collections without a track record. Forecast receipts on actual payment behavior by customer, not invoice due dates.
- Not tracking forecast accuracy. If you do not compare forecast to actual each week, you will not know when the model has stopped being right.
Triggers
Agree on triggers with your board before you need them: for example, a set number of months of runway that starts a fundraising process, and a lower number that starts a cost plan. Writing them down turns a stressful conversation into a planned one.
What we deliver
A 13-week forecast updated weekly, a monthly operating model updated at each close, and runway shown with the assumptions that drive it. Both are built from your actual bank, billing and accounting data, in the software you already run.
A snapshot of the first four weeks
| Week | Opening | Receipts | Payroll | Vendors | Taxes | Closing |
|---|---|---|---|---|---|---|
| 1 | $2,400,000 | $180,000 | $0 | $95,000 | $0 | $2,485,000 |
| 2 | $2,485,000 | $60,000 | $310,000 | $40,000 | $0 | $2,195,000 |
| 3 | $2,195,000 | $410,000 | $0 | $120,000 | $25,000 | $2,460,000 |
| 4 | $2,460,000 | $75,000 | $310,000 | $55,000 | $0 | $2,170,000 |
Payroll weeks and large renewal collections dominate. A monthly average would show none of this, which is why near-term cash decisions should be made from the weekly view.
Scenarios
Run at least two versions: a base case and a downside where the largest renewals slip a month and new bookings come in lower. The gap between them is the margin for error your plan actually has.
Who owns the inputs
Finance owns the model; sales owns the renewal dates and collection expectations; department heads own hiring dates and vendor commitments. A short weekly update from each keeps the forecast honest.
Sources
- U.S. Small Business Administration, Manage your finances
- FASB Accounting Standards Codification, Topic 230, Statement of Cash Flows
Questions founders ask
How is runway calculated?
Cash on hand divided by average monthly net burn is the quick version. A better version runs the forecast forward month by month and finds the month cash falls below your minimum balance.
Why 13 weeks?
It is long enough to cover a full quarter of payroll, vendor and collection cycles, and short enough to forecast from actual invoices and bills rather than assumptions.
