How To Calculate Cash Burn in Deltek Costpoint | Arithmix

Calculating cash burn is an important task for any business owner or financial manager. It helps you understand how much money your company is spending each month and how quickly you are using up your available cash. This information is crucial for making informed decisions about your business's financial health and future growth. In this article, we will discuss what cash burn is, when it is valuable to calculate it, and how to calculate it.

What Is Cash Burn?

Cash burn is the rate at which a company is spending its available cash. It is calculated by subtracting the total cash balance at the end of a period from the cash balance at the beginning of the period and then dividing that number by the number of months in the period. This gives you the average monthly cash burn rate. For example, if your company had $100,000 in cash at the beginning of the month and $80,000 at the end of the month, your cash burn rate for that month would be $20,000.

Cash burn is an important metric for startups and other companies that are not yet profitable. It helps them understand how long they can continue operating before they run out of cash. It is also useful for established companies that are going through a period of rapid growth or facing financial challenges.

When Is It Valuable To Calculate Cash Burn?

Calculating cash burn is valuable in a variety of situations. For startups, it is important to know how much runway they have before they run out of cash. This information can help them make decisions about fundraising, hiring, and other expenses. For established companies, cash burn can help them identify areas where they can cut costs or improve efficiency.

Cash burn is also useful when a company is going through a period of rapid growth. In this situation, it is important to understand how much cash is needed to support that growth and how quickly the company is using up its available cash. This information can help the company plan for future fundraising or adjust its growth strategy.

How to Calculate Cash Burn

Calculating cash burn is a straightforward process. First, you need to gather your company's financial statements for the period you want to calculate. This typically includes the income statement, balance sheet, and cash flow statement. You will also need to know the beginning and ending cash balances for the period.

Once you have this information, you can calculate cash burn using the following formula:

Cash Burn = (Beginning Cash Balance - Ending Cash Balance) / Number of Months

For example, if your company had a beginning cash balance of $100,000 and an ending cash balance of $80,000 over a three-month period, your cash burn rate would be:

Cash Burn = ($100,000 - $80,000) / 3 = $6,667 per month

It is important to note that cash burn is just one metric that should be used in conjunction with other financial metrics to make informed business decisions. It is also important to regularly update your cash burn calculations to ensure that you have the most up-to-date information.

In conclusion, calculating cash burn is an important task for any business owner or financial manager. It helps you understand how much money your company is spending each month and how quickly you are using up your available cash. By understanding your cash burn rate, you can make informed decisions about your business's financial health and future growth.

How Do You Calculate Cash Burn in Deltek Costpoint

Deltek Costpoint 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 Deltek Costpoint 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 Deltek Costpoint, 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 Deltek Costpoint 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 Deltek Costpoint 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.