Practical guide
Gross vs net burn rate: formulas and a cash example
Understand gross and net burn rate, calculate both, and separate operating cash from financing inflows.
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What is the difference between gross and net burn?
Gross burn is monthly cash spending. Net burn subtracts operating cash receipts from that spending. The difference matters when two startups have the same expense base but different customer collections.
Calculate both figures
Use these illustrative monthly amounts: payroll $48,000, rent and operations $7,000, software and infrastructure $9,000, and acquisition spending $16,000. Total cash expenses are $80,000. If customers pay $35,000 during the month, net burn is 80,000 − 35,000 = $45,000.
In the calculator, enter $80,000 as monthly cash expenses and $35,000 as monthly cash revenue. The two results answer different questions: gross burn measures the expense footprint, while net burn measures the operating cash gap under the entered assumptions.
Reconcile the bank movement
Suppose the same company also receives $200,000 from investors. Its cash balance increases by $155,000 before other movements, but that does not mean operating burn became negative $155,000. The financing receipt changes the cash available to fund operations; it does not repeat each month.
A reconciliation can show opening cash, customer receipts, operating payments, financing, and closing cash in separate rows. This makes an unexpected movement easier to trace. Loan repayments, asset purchases, refunds, and tax settlements may require additional rows depending on your reporting definition.
Common burn-rate questions
Is net burn the same as an accounting loss?
Not necessarily. This tool uses cash inputs. An invoice issued but not collected and an expense recognized before payment can create different cash and accounting results. Use the same cash basis in both input fields.
What if revenue exceeds expenses?
The tool floors net burn at zero. For $80,000 of expenses and $90,000 of receipts, it shows zero burn rather than the $10,000 cash surplus. Record that surplus separately when forecasting the next opening balance. The gross-burn result still shows the full expense base.
Use the burn rate calculator to reproduce the scenario with your own inputs.