Bill has been sending applications for three weeks. He has had two interviews, one second round, and no offer. He checks his bank account on a Monday morning and sees 600 euro.
He does not panic. But he starts to calculate.
At the current rate of spending, roughly 200 euro per month on transport, food outside the house, and the small costs of being a person who is trying to look employable, he has three months left.
This is what accounting calls cash burn rate: the speed at which an entity consumes its available liquidity in the absence of inflows. It is not a dramatic concept. It is simply the answer to a practical question: given what you have and what you spend, how long can you operate before the balance reaches zero?
Bill runs the number for the first time in his life. 600 euro divided by 200 per month. Three months. His runway, expressed in accounting terms, is three months.
He does not change his spending. He does not open a spreadsheet. But the number stays with him. Three months is not an abstraction. Three months is August.
He sends four more applications that afternoon.
The tip
Cash burn rate is not only a startup metric. Anyone without a stable income has a runway. Knowing the number does not change it, but it changes how seriously you take the calendar.
Cash burn rate: 200 per month. Available liquidity: 600. Runway: 3 months. The ledger records no income in May. Outflows continue.
Bill is 24. He has just graduated. Every episode, we read his personal ledger through accounting eyes. / FY 2024 ledger