1. Find the cash you can actually spend
Your bank balance minus money that isn’t yours: sales tax collected, customer deposits for work not yet done. A small bakery has $18,000 available.
2. Average cash out and cash in
Use the last three months of bank statements, not your best month. The bakery pays out about $14,500 a month and collects about $12,000. Count only money actually received; invoices aren’t cash.
3. Find the monthly shortfall
Cash out − cash in = $2,500 a month. If cash in is higher, there’s no shortfall and runway isn’t the right measure; skip to the buffer.
4. Divide for runway
$18,000 ÷ $2,500 = 7.2 months at the current pace.
5. Calculate the buffer
The buffer is how long you could pay the bills if no money came in at all: cash ÷ (cash out ÷ 30). $18,000 ÷ $483 a day = 37 days.
6. Subtract the big bills you know are coming
A $4,000 quarterly tax payment next month cuts available cash to $14,000: runway falls to 5.6 months and the buffer to 28 days. Plan for it now, not the week it’s due.
In a spreadsheet
B1: Cash available (18000)
B2: Cash out a month (14500)
B3: Cash in a month (12000)
B4: Runway months: =IF(B2>B3, B1/(B2-B3), "No shortfall")
B5: Buffer days: =ROUNDDOWN(B1/(B2/30),0)
What to do with the answer
Under three months of runway, act now: collect what customers owe, delay what you can, and look at prices. Over six months, you have time to fix the cause of the shortfall rather than react to it.
Published by Groundwork Business Advisory. Updated October 19, 2026.