Do you know your cash burn rate?

August 09, 2013 — Feature Highlight

Running a small business? Or freelancing?

Like zealous zombies, those bills just keep coming…

And your income often doesn’t! Unless you have recurring income in place — I’ll get back to that in a upcoming article.

So you try hard to enjoy the warmth of the summer…

BUT…

You feel doubt in the back of your head, a little fear that maybe, or even for sure, October will be tough for your bank account balance.

Do you crave for accurate facts that would help you sleep better at night and enjoy those summer holidays even more?

I have a little something for you then!

The cash flow forecasting provided by WiseCash includes what I call the monthly breakdown, which summarizes the monthly expenses, income and profit.

Here’s how it looks for a typical freelancing business without recurring income:

Freelance monthly cash flow

In particular, this forecasting lets you figure out your burn rate for each coming month (here, around $ -8,000 for October).

It also shows you, in this specific case, that building some recurring income would be useful!

Having a lot of red here does not mean that you are in danger as a freelance (since you could just have a lot of cash savings, maybe worth some years of bills). Instead, the profit indicates if your cash balance is going up or down in the coming months.

Make sure that your overdue invoices get paid to you if you have some — and make sure to bill your clients on time, too.

Finally, you can use it directly to figure out how much extra revenue you should make to remain at the same level of cash (break even point).

Burn rate applies to you just as well as to VC-backed startups!

How to improve your cash burn rate?

Once you have accurate forecasting data, you can leverage it to improve your situation…

I’ll dive into this topic in upcoming articles, but here is an appetizer of what you could do:

  • raise your rates or product prices
  • create new sources of income — recurring if possible
  • lower your expenses (relocate to a cheaper area like we did)

That is all for today. In my next feature highlight, I will explain what time-wealth is and how critical it is to running your business.

Thibaut Barrère (WiseCash founder)

@thibaut_barrere

thibaut@wisecashhq.com

Thanks for sharing this article around!


Still managing your business cash-flow in a spreadsheet?
That must hurt, right?

WiseCash helps you rule your finances with an iron fist,
without having to labor a spreadsheet!

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