Gross Cash Burn vs Net Cash Burn – Explained

Net Cash Burn = Opening Cash Balance – Closing Cash Balance

Net cash burn (also known as net-negative cash flow) should always equal the amount your cash balance decreased in a period. Investments or other atypical positive cash flows such as grants, should not be included in the calculation.

This metric is particularly popular with young SaaS startups to help businesses understand their cash runway. Both lenders and investors like this metric, because they need to know how far an investment can extend the cash runway of a business.

Gross Cash Burn = Total Operating Costs

Your Gross Cash Burn is the total amount of money you’re spending each month. Throughout SaaS, Net Burn Rate is much more commonly used due to the consistent nature of recurring subscriptions. If your revenue isn’t recurring or is otherwise inconsistent, gross burn may be more useful to you.

Elements of Finance

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