How it works
Monthly shortfall (burn) = cash going out − cash coming in
Runway in months = cash available ÷ monthly shortfall
Cash buffer in days = cash available ÷ (cash going out ÷ 30)
Runway tells you how long the current pace can last. The buffer tells you how long you could pay the bills if no money came in at all. When cash coming in covers cash going out, there is no shortfall, and runway isn’t a meaningful number; watch the buffer instead.
A worked example
A small catering company has $25,000 in the bank. It pays out about $18,000 a month and collects about $16,000, a $2,000 monthly shortfall. Runway is $25,000 ÷ $2,000 = 12.5 months.
Its buffer is $25,000 ÷ ($18,000 ÷ 30) = 41 days: if every customer stopped paying, it could cover the bills for about six weeks. With a $10,000 tax payment due next month, cash available drops to $15,000, runway to 7.5 months and the buffer to 25 days.
Common mistakes
- Counting invoices as cash. Money a customer owes you isn't in the bank until they pay.
- Spending money that isn't yours, like sales tax collected or a customer's deposit for work not yet done.
- Using a good month as the average. Runway built on your best month will be too long.
What this doesn’t tell you
Runway assumes each month looks like your average. Seasonal businesses, big one-time bills and customers who pay late all change the picture; a 12-month cash forecast, month by month, is the better tool once you know your patterns. This doesn't include credit lines or loans you could draw on.
Related calculators
Go deeper: 15 Numbers Every Small Business Owner Should Know, from The Groundwork Review.
Anticipated Questions
How much cash should a small business keep on hand?
It depends on how steady your sales are and how fast you could cut costs. A JPMorgan Chase Institute study of about 597,000 small businesses found the typical one held about 27 days of cash outflows (2015 data, Chase customers only). Many owners aim higher; use the buffer here to see where you stand.
What's the difference between runway and buffer?
Runway assumes money keeps coming in at today's pace and measures how long the shortfall can last. Buffer assumes nothing comes in and measures how long you could still pay the bills.
My runway is short. What do I do first?
Collect what customers already owe you, then look at the biggest monthly costs you can delay or cut, then prices. Each month of runway you add buys time to fix the cause.
Should my own pay be included?
Yes. If you need it to live, it's cash going out. Leaving it out makes the business look safer than it is.
Sources
- JPMorgan Chase Institute: Cash Flows, Balances and Buffer Days (September 2016; 2015 data)
- U.S. Small Business Administration: Manage your finances
Last reviewed October 19, 2026. How our calculators work. General information for planning, not legal, tax or financial advice. Found an error? Email info@groundworkbusinessadvisory.com.
