Burn Rate
Definition
How much cash your business loses in a month after all money in and out. A business that is cash-positive has no burn.
Want a deeper explanation?
Formula
Net Burn Rate = Cash at Start of Month − Cash at End of Month (excluding new loans or investment)Burn rate is the honest view of cash, separate from profit. A business can show a profit and still burn cash, especially in months when it is building inventory or paying down debt.
Looking at a three-month average smooths out one-off swings like a big purchase order or tax payment. Watch for: burn rising faster than revenue, which means growth is getting more expensive to fund.
Example
You started March with $120,000 and ended with $102,000, a net burn of $18,000.