How To Calculate Cash Burn in Workday | Arithmix

Calculating cash burn is a crucial task for any business owner or financial analyst. It helps you understand how much cash your company is spending each month and how quickly you are burning through your available funds. In this article, we will discuss what cash burn is, when it is valuable to calculate it, and how to calculate it in Workday.

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 essential metric for startups and other companies that are not yet profitable because it helps them understand how long they can continue operating before running out of cash.

Cash burn is also a critical metric for investors and lenders who want to assess a company's financial health. If a company has a high cash burn rate, it may indicate that it is not generating enough revenue to cover its expenses, which could be a warning sign for potential investors or lenders.

When Is It Valuable To Calculate Cash Burn?

Calculating cash burn is valuable in several situations. For example, if you are a startup founder, you need to know your cash burn rate to understand how long you can continue operating without raising additional funds. Similarly, if you are an investor or lender, you need to know a company's cash burn rate to assess its financial health and determine whether it is a good investment or lending opportunity.

Calculating cash burn is also valuable if you are trying to reduce your expenses or improve your cash flow. By understanding your cash burn rate, you can identify areas where you can cut costs or increase revenue to extend your runway and avoid running out of cash.

How To Calculate Cash Burn In Workday

Calculating cash burn in Workday is relatively straightforward. First, you need to gather your cash inflows and outflows for a specific period, such as a month or a quarter. Cash inflows may include revenue from sales, investments, or loans, while cash outflows may include expenses such as salaries, rent, and supplies.

Once you have your cash inflows and outflows, subtract the total cash outflows from the total cash inflows to get your net cash flow for the period. Then, divide your net cash flow by the number of months in the period to get your average monthly cash burn rate.

For example, if your total cash inflows for the month were $50,000, and your total cash outflows were $60,000, your net cash flow would be -$10,000. If you divide that by one month, your average monthly cash burn rate would be -$10,000.

By calculating your cash burn rate in Workday, you can gain valuable insights into your company's financial health and make informed decisions about your expenses and revenue. With this information, you can extend your runway, avoid running out of cash, and position your company for long-term success.

How Do You Calculate Cash Burn in Workday

Workday 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 Workday 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 Workday, 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 Workday 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 Workday 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.