How do you calculate net burn?

An invented startup in April:

• Cash and bank on 1 April: $1,940,000
• Cash and bank on 30 April: $2,610,000
• In April it drew a new $800,000 loan

The change in cash is 2,610,000 − 1,940,000 = +$670,000: cash went up. Take the financing out: 670,000 − 800,000 = −$130,000.

Net burn = $130,000. The bank balance rose only because of the loan; the business itself used $130,000. If customers paid $95,000 in April, gross burn was about $225,000.

A trial balance gives the closing cash and bank balances, which is all the change in cash needs. Compare two month-end trial balances, then take out financing using the movements on:

• share capital and share premium (equity raised);
• loans and convertible notes (drawn or repaid);
• the director's loan account, where the movement is material.

That route captures everything the business did, including working-capital swings such as a large customer paying early. That is a feature, not a fault, but explain the swing in the commentary.

One month's burn jumps with annual bills, months with an extra payroll run and lumpy receipts. Investors look at the three-month average, and runway is cash ÷ that average.

A company can make a loss and burn less cash, because customers paid upfront for annual contracts; or make a profit and burn cash, because customers paid late or stock built up. Show both, and explain the gap with the movements in debtors, deferred revenue and stock.

• A loan or equity raise counted as negative burn. Financing isn't performance; take it out.
• The loss used as burn. Depreciation, accruals and deferred revenue make them differ.
• A bank account left out, which makes the change in cash wrong.
• A working-capital swing left unexplained. A big annual invoice paid early cuts one month's burn; say so, or next month looks like a crisis.
• One month reported alone. Give the three-month average beside it.

Magic MIS builds a cash flow statement from each month's trial balance: cash from operating, investing and financing activities, and the net change in cash. Net burn is the first two together with the sign turned, which leaves financing out. The board's runway lens divides cash by the average monthly fall in cash and bank over three months, which includes financing, so read it beside those lines in a month when money was raised or borrowed. Every figure opens to the ledgers behind it.