Money in / money out

A simple burn-rate model you can build in an afternoon

Updated 17 July 20268 min readLedgers Team

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You don't need a finance team to see your future cash
First, the two words you need: gross burn and net burn
The structure: one row per line, one column per month
Read it: three things it instantly tells you
Run the scenarios that matter
Keep it honest, and keep it fed

Money in / money out1 of 6

1.A simple burn-rate model you can build in an afternoon
2.Default alive vs default dead: what it actually means for your numbers
3.How to read your numbers when you hate numbers
4.What is gross margin and why should I care?
5.What is runway and how do I work out mine?
6.Working capital explained (the money your business needs to breathe)

Quick answer

You don't need a finance team to model your burn and runway. Here's how to build a simple, honest 12-month cash model in a spreadsheet in an afternoon — what goes in each row, and the scenarios worth running.

You don't need a finance team to see your future cash

A burn-rate model sounds like something a CFO builds. It isn't. At its heart it's just a spreadsheet that answers one question month by month: if we keep going like this, how much cash will we have? You can build a useful one in an afternoon, and once you have it, you can stop guessing about runway and start making decisions with actual numbers behind them.

This guide walks through building a simple, honest 12-month model — what each row is, how the maths flows, and the scenarios worth running. It's deliberately basic, because at pre-seed stage a simple model you actually understand and update beats an elaborate one you built once and never opened again.

First, the two words you need: gross burn and net burn

Before building anything, get these straight, because they're the output the whole model exists to produce.

Gross burn is your total monthly spend — every pound going out: salaries, software, rent, contractors, everything.
Net burn is gross burn minus the cash coming in. If you spend £30,000 in a month and revenue brings in £10,000, your gross burn is £30,000 and your net burn is £20,000.

Runway — how many months until the cash runs out — is based on net burn, because incoming revenue offsets part of your spend. A model's job is to track both, and the closing cash balance they produce, across the months ahead. For the concept in isolation, see What is runway and how do I work out mine →.

The structure: one row per line, one column per month

Open a spreadsheet. Make the columns months — this month through twelve months out. Then build these rows, top to bottom. This ordering matters, because each block feeds the next.

Row 1 — Opening cash. The first month's opening cash is your real bank balance today. Every later month's opening cash is simply the previous month's closing cash (a formula pointing one cell left). This is the spine of the model.

Revenue rows. One or a few rows for money coming in. If you have revenue, project it forward at the growth rate you're actually seeing — not the ambitious one. If you're pre-revenue, this is zero for now, and that's fine; the model still works. Be conservative here; optimistic revenue is the most common way these models lie to you.

Cost rows — grouped so you can see what's driving burn. Don't dump everything in one row; split it into a handful of groups so the model tells you where the money goes:

People — salaries (including yours), employer's National Insurance, pension contributions, key contractors. This is usually the biggest line.
Software & tools — your subscriptions.
Rent & overheads — workspace, insurance, the fixed stuff.
Everything else — marketing, legal, one-offs.

Crucially, include costs you've committed to but haven't paid yet — the hire whose offer you've signed, the annual bill renewing next quarter. A model that only shows today's costs flatters you.

Total spend (gross burn). A row summing all the cost rows. This is your gross burn per month.

Net burn. Revenue minus total spend. A negative number is burn (normal); a positive number means you're cash-flow positive that month.

Closing cash. Opening cash plus net burn. This is the number everything was built for — and it becomes next month's opening cash.

That's the whole model. Six blocks, a handful of formulas, and you can see your cash balance for every month of the next year.

Read it: three things it instantly tells you

Once it's built, the model answers questions a bank balance never could:

When does cash hit zero? Scan the closing-cash row for the month it goes negative. That's your runway, precisely, accounting for changing revenue and costs — not the rough "cash ÷ burn" estimate.
Are you default alive or default dead? If a revenue row overtakes total spend (net burn turns positive) before closing cash hits zero, you're default alive. If cash runs out first, you're default dead. See Default alive vs default dead →.
What's actually driving the burn? Because costs are grouped, you can see at a glance that (say) 70% of your burn is people — which tells you where any lever you pull will have to come from.

Run the scenarios that matter

The real power of a model is asking "what if" before you commit, not after. Duplicate the sheet and change one thing:

The next hire. Add a salary to the People row from the month you'd start them. Watch how many months of runway it costs you. Sometimes a hire you assumed was fine quietly moves your zero-cash date forward by four months.
Slower growth. Halve your revenue growth rate. If the model still survives, you've got a margin of safety; if it collapses, your plan depends on optimism.
A cost cut. Remove or reduce a cost line and see how much runway it buys back. Useful ammunition when you need to extend.
Raising. Add an injection of cash in a future month and see how the picture changes — and, importantly, whether you'd reach default alive before needing to raise again.

Each scenario takes two minutes once the model exists, and each one turns a nervous guess into an informed decision.

Keep it honest, and keep it fed

Two habits make a model trustworthy. First, base it on real numbers. Your opening cash and your recent actual spend should come from reconciled books, not memory — a model built on wrong actuals produces confident nonsense. This is where clean, current bookkeeping pays off: it feeds the model reliable inputs. See How to read your numbers when you hate numbers →.

Second, update it monthly. Replace each month's projection with what actually happened, and re-project forward. A model you refresh is a decision tool; one you built once and abandoned is a museum piece.

If you later want a more detailed, investor-grade version — the kind you'd put in a data room — that's a natural evolution of this same structure. See How to forecast cash for your next 12 months (investor-grade) →. But start simple. An honest six-row model you actually use beats a beautiful one you don't.

Building the model is the easy afternoon; keeping its inputs accurate every month is the ongoing bit. Ledgers keeps your cash, burn and runway live from your reconciled books — so the numbers feeding your model are always right, and the runway is already worked out for you. See your live burn and runway → free to try.

Next: How much should a pre-seed startup spend on finance? →

Frequently asked questions

What's the difference between gross burn and net burn?

Gross burn is your total monthly spend — all the cash going out. Net burn is that spend minus the cash coming in. If you spend £30,000 and bring in £10,000, your gross burn is £30,000 and your net burn is £20,000. Runway is based on net burn, because incoming revenue offsets some of the spend.

How detailed does a burn-rate model need to be?

For a pre-seed startup, simple and honest beats complex and precise. A single spreadsheet with a row for cash, a few revenue and cost rows, and a monthly closing balance is enough to answer the questions that matter. You can always add detail later; you can't get back the time a bloated model eats.

Do I still need this if my accounting software shows runway?

They do different jobs. Software tells you where you are now from real, reconciled data. A model lets you ask "what if" — what if we hire, what if growth slows, what if we cut a cost. The best setup is both: accurate actuals feeding a simple model you use to make decisions.

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