How To Calculate Cash Burn in Wave Accounting | Arithmix

Calculating cash burn is an essential task for any business owner. It helps you understand how much money your company is spending each month and how quickly you are using up your cash reserves. In this article, we will discuss how to calculate cash burn in Wave Accounting, a popular accounting software for small businesses.

What Is Cash Burn?

Cash burn is the rate at which a company is spending its cash reserves. It is calculated by subtracting the total cash outflows from the total cash inflows over a specific period. Cash burn is an important metric for startups and small businesses because it helps them understand how long they can operate before they run out of cash.

For example, if a company has $100,000 in cash reserves and is burning $10,000 per month, it will run out of cash in 10 months. Cash burn is also useful for investors and lenders who want to evaluate the financial health of a company.

When Is It Valuable To Calculate Cash Burn?

Calculating cash burn is valuable for any business, but it is especially important for startups and small businesses that are still in the early stages of growth. These companies often have limited cash reserves and need to be careful about how they spend their money.

Calculating cash burn can help these companies make informed decisions about their spending and prioritize their expenses. For example, if a company is burning cash faster than it is generating revenue, it may need to cut back on expenses or raise additional funding to stay afloat.

Even established businesses can benefit from calculating cash burn. It can help them identify areas where they can reduce expenses and improve their cash flow. By monitoring their cash burn, businesses can also avoid running out of cash unexpectedly and plan for future growth.

In conclusion, calculating cash burn is an important task for any business owner. It helps you understand how much money your company is spending each month and how quickly you are using up your cash reserves. By using Wave Accounting or other accounting software, you can easily calculate your cash burn and make informed decisions about your spending.

How Do You Calculate Cash Burn in Wave Accounting

Wave Accounting 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 Wave Accounting 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 Wave Accounting, 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 Wave Accounting 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 Wave Accounting 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.