# Burn rate

> Burn rate is the cash a company consumes each month: total payments (gross) or payments minus receipts (net). With available cash, it determines runway.

Updated: 2026-09-03 · Author: Santiago Viglione (Fibady) · https://www.fibady.com/en/glossary/burn-rate

Burn rate is the amount of cash a company consumes each month. Gross burn is the month's total payments; net burn is payments minus receipts. Together with available cash, it determines runway.

## How it is calculated

Gross burn = Σ payments in the month. Net burn = Σ payments − Σ receipts in the month. It is calculated on actual bank movements, not on the P&L, and is usually expressed as a 3-month average to avoid calendar distortions.

## Example with numbers

May payments 200,000 (payroll 120,000, suppliers 60,000, taxes 20,000); receipts 150,000. Gross burn: 200,000. Net burn: 50,000. If in June a large customer's quarterly payment of 90,000 comes in, the month's net burn drops to −40,000, but the 3-month average stays around 40,000: that is the figure to plan with.

## How Fibady does it

Burn is calculated from the direct cash flow, with each entity's bank movements classified by category, and is shown per entity and for the group. It is combined with available cash, including undrawn credit lines, to give the group's runway.

## Frequently asked questions

### Is burn rate the same as accounting loss?

No. Burn measures cash, loss measures result. A company can have a loss of 30,000 and a burn of 80,000 if it collects late or pays for investments.

### How often is it calculated?

Monthly with the bank close, and as a 3-month average to smooth spikes such as bonuses or quarterly taxes.

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