How To Calculate Cash Burn in Sage | Arithmix

Calculating cash burn is an important financial analysis that helps businesses understand their cash flow situation. It is a measure of how quickly a company is spending its cash reserves and how long it can continue to operate before running out of cash. In this article, we will discuss what cash burn is, when it is valuable to calculate it, and how to calculate it in Sage.

What Is Cash Burn?

Cash burn is the rate at which a company is spending its cash reserves. It is calculated by subtracting the company's expenses from its cash balance. The result is the amount of cash the company is burning through each month. Cash burn is an important metric for startups and other businesses that are not yet profitable. It helps them understand how long they can continue to operate before they need to raise more funds or become profitable.

Cash burn is not just a measure of how much money a company is spending. It also takes into account the company's revenue and the amount of cash it is generating. If a company is generating more cash than it is spending, it has a positive cash flow. If it is spending more cash than it is generating, it has a negative cash flow. Cash burn is a measure of a company's negative cash flow.

When Is It Valuable To Calculate Cash Burn?

Calculating cash burn is valuable for any business that is not yet profitable or is experiencing financial difficulties. It helps businesses understand their cash flow situation and make informed decisions about their finances. Cash burn is particularly important for startups and other businesses that are in the early stages of development. These businesses often rely on investors to fund their operations, and cash burn helps them understand how long they can continue to operate before they need to raise more funds.

Cash burn is also valuable for businesses that are experiencing financial difficulties. It helps them understand how quickly they are burning through their cash reserves and how long they can continue to operate before they run out of cash. This information can be used to make informed decisions about cost-cutting measures and other financial strategies.

How to Calculate Cash Burn in Sage

Sage is a popular accounting software that can be used to calculate cash burn. To calculate cash burn in Sage, you will need to follow these steps:

1. Open Sage and go to the "Reports" tab.
2. Select "Profit and Loss" from the list of reports.
3. Select the date range for the report. This should be the period for which you want to calculate cash burn.
4. Run the report and note the total expenses for the period.
5. Go to the "Banking" tab and select "Bank Accounts."
6. Select the bank account you want to calculate cash burn for.
7. Take note of the starting and ending balance for the period.
8. Calculate the average balance for the period by adding the starting and ending balances and dividing by two.
9. Subtract the total expenses for the period from the average balance to get the cash burn for the period.

By following these steps, you can calculate cash burn in Sage and use this information to make informed decisions about your business's finances.

How Do You Calculate Cash Burn in Sage

Sage 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 Sage 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 Sage, 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 Sage 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 Sage 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.