How To Calculate Cash Burn in Acumatica | Arithmix

Calculating cash burn is an essential process for any business owner or entrepreneur. It helps you understand how much money your business is spending each month and how long your cash reserves will last. In this article, we will discuss what cash burn is, when it is valuable to calculate it, and how to calculate it using a simple formula.

What Is Cash Burn?

Cash burn is the rate at which a company is spending its cash reserves. It is calculated by subtracting the monthly cash inflows from the monthly cash outflows. The result is the net cash flow for the month. If the net cash flow is negative, it means that the company is burning through its cash reserves. If the net cash flow is positive, it means that the company is generating more cash than it is spending.

It is important to note that cash burn is not the same as net income. Net income is the difference between the revenue and expenses of a company over a period of time, usually a year. Cash burn, on the other hand, is a measure of how much cash a company is spending each month.

When Is It Valuable To Calculate Cash Burn?

Calculating cash burn is valuable for any business, but it is especially important for startups and early-stage companies. These companies often have limited cash reserves and need to know how long their cash will last. Knowing your cash burn rate can help you make informed decisions about your spending and fundraising efforts.

Calculating cash burn is also valuable for established companies that are experiencing financial difficulties. If a company is burning through its cash reserves too quickly, it may need to make changes to its operations or seek additional funding.

How to Calculate Cash Burn

Calculating cash burn is a simple process that involves subtracting the monthly cash inflows from the monthly cash outflows. The formula for calculating cash burn is:

Cash Burn = Monthly Cash Outflows - Monthly Cash Inflows

Monthly cash outflows include all of the expenses that a company incurs each month, such as rent, salaries, and utilities. Monthly cash inflows include all of the cash that a company receives each month, such as revenue from sales or investments.

Once you have calculated your cash burn rate, you can use it to determine how long your cash reserves will last. For example, if your cash burn rate is $10,000 per month and you have $100,000 in cash reserves, your cash will last for 10 months.

It is important to note that cash burn is not a static number. It can change from month to month depending on your expenses and revenue. It is important to recalculate your cash burn rate regularly to ensure that you have an accurate picture of your financial situation.

Conclusion

Calculating cash burn is an important process for any business owner or entrepreneur. It helps you understand how much money your business is spending each month and how long your cash reserves will last. By following the simple formula outlined in this article, you can calculate your cash burn rate and make informed decisions about your spending and fundraising efforts.

How Do You Calculate Cash Burn in Acumatica

Acumatica itself isn’t naturally geared towards letting you calculate complex metrics like Cash Burn. As an alternative, teams typically use products like Arithmix to import data from Acumatica and build out dashboards.

What is Arithmix?

Arithmix is the next generation spreadsheet - a collaborative, web-based platform for working with numbers that’s powerful yet easy to use. With Arithmix you can import data from systems like Acumatica, combine it with data from other systems, and create calculations like Cash Burn.

In Arithmix, data is organized into Tables and referenced by name, not by cell location like a spreadsheet, simplifying calculation creation. Data and calculations can be shared with others and re-used like building blocks, vastly streamlining analysis, model building, and reporting in a highly scalable and easy to maintain platform. Data can be edited, categorized (by dimensions) and freely pivoted. Calculations are automatically copied across a dimension - eliminating copy and paste of formulas.

Arithmix is fully collaborative, giving your entire team access to your numbers and the ability to work together seamlessly.

Calculating Cash Burn in Arithmix

Calculating metrics like Cash Burn is simple in Arithmix. Once you've created your free account, you’ll be able to import your Acumatica data, and use it to create natural language formulas for metrics like Cash Burn.

Arithmix is designed to give you the power to build any calculations you want on top of your Acumatica data, while also being easy to use and collaborate on. You can share your dashboards with users inside and outside of your organisation, making it easy to empower your whole team.