Cash runway is the number of months a business can continue operating at its current burn rate before it runs out of cash. It is one of the most critical metrics for any UK SME.
Worked Example — UK SME
Cash balance: £45,000. Monthly fixed costs: £18,000. Monthly revenue: £15,000. Net monthly burn: £3,000. Cash runway = 45,000 ÷ 3,000 = 15 months.
Common Questions
What counts as 'available cash' for runway calculation?
Use your cash balance minus any VAT liability due (VAT is not your money — it belongs to HMRC). If you have a VAT bill of £8,000 and £30,000 in the bank, your true available cash is £22,000.
What does it mean if my business is 'cash-generative'?
If monthly revenue exceeds monthly costs, the business is cash-generative — runway is theoretically infinite as cash is growing, not depleting. This is the goal, but it doesn't mean you can ignore your cash buffer.
How do I extend my cash runway quickly?
Accelerate debtor collection (chase every overdue invoice today), defer any non-essential spend, negotiate extended terms with suppliers, and arrange an overdraft facility before you need it — banks lend to businesses that can demonstrate they don't need it yet.