Create cash runway projections

- Harnessing your knowledge of financials during times of uncertainty is key to running your business. Now that we've figured out how much money's leaving your business, it's time to figure out how much cash you have on hand and how long that's going to last you. I like to call this my runway analysis. It's figuring out exactly how much runway you have before your cash runs out. We're going to build our own runway analysis today using Excel or Google Sheets. Remember, it's not hard and we're going to walk through this together. Open up Excel. Create four different headers that say, cash, cash receivable, monthly expenses, and current expenses. Fill out these cells with the appropriate amounts. If Excel isn't your thing, find a CPA or a bookkeeper that can create a more curated version just for you. Figure out the amount of cash that you have on hand. Reference your bank statements to figure out how much cash you have in the bank right now. And don't forget to reference your accounts receivable. That's how much money you have coming to you from other people, but you just don't have it quite yet. Figure out your monthly expenses and your current expenses. Your monthly expenses are going to be reoccurring costs that happen every single month. These are things like payroll, rent, insurance. Your current expenses are going to be the items that are on your credit card or your credit line. You have to pay them but they might not be reoccurring. Next we're going to divide the cash you have on hand by your monthly expenses. This tells you how many months of money you're going to have to maintain your current overhead. Let's walk through an example together. Let's say you have $50,000 of cash on hand. After adding up all you monthly expenses, you've figured out that you spend, about 10 grand a month between salary, rent, and other goods. When you divide 50,000 by 10,000 you'll see that you have about five months worth of runway before you officially run out of money. Once you know how much runway you have it's important to review this with a bookkeeper or a financial advisor. I know when I was going through a time of crisis, I was talking to my CPA Adam, monthly to review these financials. I'm not going to lie, you're going to have some tough times and choices ahead. But, it's getting on top of these financial projections that are going to help you navigate these times of uncertainty.