How To Calculate Cash Burn in Zoho | Arithmix

Calculating cash burn is an essential part of managing any business. It helps you understand how much money your company is spending each month and how long your current cash reserves will last. In this article, we will discuss what cash burn is, when it is valuable to calculate cash burn, and how to calculate cash burn for your business.

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 outflows include expenses such as salaries, rent, and other operating costs, while cash inflows include revenue from sales, investments, and other sources.

For example, if your company has $100,000 in cash reserves and spends $10,000 per month on operating expenses, your cash burn rate would be $10,000 per month. This means that your company has 10 months of cash reserves before it runs out of money.

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 current funds will last. By calculating cash burn, they can make informed decisions about spending and fundraising.

Cash burn is also useful for established companies that are experiencing financial difficulties. By calculating cash burn, they can identify areas where they can cut costs and improve their financial position.

How To Calculate Cash Burn

To calculate cash burn, you need to gather information about your company's cash inflows and outflows over a specific period. This period is typically one month, but it can be longer or shorter depending on your needs.

First, calculate your total cash inflows for the period. This includes revenue from sales, investments, and other sources. Next, calculate your total cash outflows for the period. This includes expenses such as salaries, rent, and other operating costs.

Once you have these figures, subtract your total cash outflows from your total cash inflows to get your net cash flow for the period. Finally, divide your net cash flow by the number of months in the period to get your cash burn rate.

For example, if your total cash inflows for the month were $50,000 and your total cash outflows were $40,000, your net cash flow would be $10,000. If the period was one month, your cash burn rate would be $10,000 per month.

By calculating your cash burn rate regularly, you can track your company's financial health and make informed decisions about spending and fundraising. It is an essential tool for any business owner or manager.

How Do You Calculate Cash Burn in Zoho

Zoho 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 Zoho 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 Zoho, 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 Zoho 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 Zoho 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.