Ask a founder for their burn rate and you'll usually get a pause, then a range. Ask for last month's bank statement and you'll get a file. That's the trick: the bank already recorded the truth about what you spent. What it didn't do is sort it. Twenty minutes of disciplined sorting gets you a gross burn rate you can defend to a board, a lender, or a co-founder who insists the cloud bill is "not that bad."
Gross burn is the total cash that leaves the business each month to keep it running, before netting off anything coming in. Net burn is gross burn minus revenue collected in the same period. Investors tend to ask about net burn because it drives runway. Operators should watch gross burn because it shows the cost of the machine independent of how sales happen to land that month.
Bank statements give you a cash view, not an accrual view. That's a feature — cash is what runs out — but it's messy. A month with an annual insurance premium and a tax payment will look brutal and mean nothing. So the goal isn't to copy the statement into a spreadsheet; it's to normalize it into a repeatable number.
Have four things within reach:
Three months is the right window. One month catches noise; twelve months takes too long and hides recent changes in spending.
Drop every export into one sheet and add an account column so you know where each line came from. Standardize the sign convention now — outflows negative, deposits positive is the common one. If you have two banks that disagree, fix it with a single find-and-replace rather than by hand.
This is where most DIY burn calculations go wrong. Not everything leaving your account is an operating expense.
Now decide, once, how you'll treat large one-off items like equipment or a prepaid annual contract. Excluding capital purchases for a pure operating burn is defensible; including them for a cash burn figure is also defensible. Mixing the two month to month is not.
Keep it to roughly ten categories. More than that and you'll stop maintaining the file by month three.
Sort by vendor first, not by line description — "ACH DEBIT 4471 STRP" and "STRIPE FEES SEP" should land in the same bucket. Build a vendor-to-category lookup tab and reuse it every month. If you have more than a handful of uncategorized lines after a few passes, your vendor list is the problem, not your accounting.
A burn report that changes shape every month is less useful than a rough one that looks the same every month.
Sum the categorized outflows for each month, then divide the three-month total by three. Say February, March, and April come to $61,400, $74,200, and $76,400 — $212,000 over three months, or about $70,700 in average monthly gross burn. Note that the trend matters more than the average; the most recent month is closest to what your runway actually assumes.
Then, separately, add up deposits that represent real revenue — not transfers, not refunds, not investor money — and subtract that from gross burn to get net burn. Keep both figures on the page. They answer different questions.
Run a quick reconciliation: opening cash, plus deposits, minus outflows, should equal closing cash for the period. If it doesn't, you've missed an account or a transfer. Then scan for the three usual distortions:
Compare the total against your accounting ledger if you have one. Differences are usually timing, but occasionally they're a genuine bookkeeping error worth fixing before it compounds. For anything going to investors, a board deck, or a loan application, have your accountant review the classifications — cash-based burn and accrual-based expense are not the same number, and the gap can be uncomfortable to explain later.
Save the spreadsheet as a template: vendor lookup tab, category column, monthly summary tab with gross burn, net burn, and closing cash. Then set a recurring reminder for the fifth of each month, once statements have settled. Fifteen to twenty minutes of sorting gives you your gross burn, your net burn, and a runway figure — cash on hand divided by net burn — that you can quote without hedging.
The real payoff isn't the number. It's that you'll start noticing the subscription you forgot to cancel, the vendor billing twice, and the tool nobody logged into since February. Burn tracking is really a spending review with better formatting, and the bank already did the hard part.
Photo: Alexas_Fotos / Pixabay
