Burn rate shows how quickly you're consuming cash. It's essential for financial planning, fundraising conversations, and understanding your business health.
#What is burn rate
Burn rate is your net cash outflow over a period:
- Gross burn: Total money going out
- Net burn: Money out minus money in
Net burn is more useful—it accounts for revenue offsetting expenses.
#View your burn rate
- Go to Overview
- Find the burn rate card
You'll see:
- Average monthly burn
- Trend over recent months
- How it affects your runway
#How burn rate is calculated
Midday calculates burn rate from your expense transactions across all enabled accounts.
#What's included
All expense transactions except those in excluded categories.
#What's excluded
Two categories are automatically excluded from burn rate to prevent double-counting:
| Category | Why it's excluded |
|---|---|
| Credit Card Payment | Prevents counting expenses twice (once on the card, once when paying the bill) |
| Internal Transfer | Moving money between your own accounts isn't spending |
#The double-counting problem
When you connect both a checking account and credit card, you'll see:
- On your credit card: Individual purchases ($50 for software, $30 for meals, etc.)
- On your checking account: Payment to credit card ($1,500)
Without exclusions, Midday would count:
- $50 + $30 + ... = expenses on credit card
- $1,500 = payment from checking
- Total = double the actual spending
By excluding credit card payments, only the actual purchases count. This is handled automatically.
#Which accounts affect burn rate
| Account Type | Transactions count toward burn? |
|---|---|
| Depository (checking, savings) | Yes |
| Other Asset (money market) | Yes |
| Credit (credit cards) | Yes |
| Loan | Yes |
All account types contribute transactions to burn rate. The exclusion logic applies to specific transaction categories, not account types.
#Understanding the numbers
#Positive burn rate
You're spending more than you're earning. Normal for:
- Early-stage startups investing in growth
- Seasonal slow periods
- Planned investment phases (hiring, expansion)
#Negative burn rate
You're earning more than spending. You're profitable—your runway is essentially infinite.
#Zero burn rate
Breaking even. Income matches expenses.
#Excluding specific transactions
Sometimes a transaction shouldn't count toward burn rate even if it's categorized as an expense:
- One-time equipment purchases
- Security deposits (you'll get them back)
- Loans to the company from founders
To exclude a transaction:
- Click on the transaction
- Find the exclude option
- The transaction will no longer affect burn rate
Use this sparingly—only for truly exceptional items.
#Trends matter
A single month's burn rate can be misleading due to one-time expenses or income. Look at:
- 3-month average: Recent trend, shows if things are changing
- 6-month average: Overall pattern, smooths out anomalies
- Year-over-year: For seasonal businesses, compare to the same period last year
#Burn rate and runway
Burn rate directly affects your runway:
Runway = Cash Balance ÷ Monthly Burn Rate
Reducing burn rate by $5,000/month on $60,000 cash extends runway from 6 months to 10 months.
#Reducing burn rate
If burn rate is too high:
- Review subscriptions: Audit software and services you're paying for
- Negotiate contracts: Vendors often offer discounts for annual payment or loyalty
- Delay non-essential purchases: Push discretionary spending to later
- Focus on efficiency: Higher-margin work or automation can help
#Common burn rate issues
#Burn rate seems too high
Check for:
- Credit card payments not categorized correctly (should be "Credit Card Payment")
- Internal transfers between accounts not categorized correctly
- One-time expenses skewing the average
#Burn rate seems too low
Check for:
- Missing accounts (expenses on unconnected accounts)
- Transactions incorrectly categorized as transfers
- Disabled accounts that should be enabled
#Burn rate is zero or missing
This usually means:
- No expense transactions in the selected period
- All accounts are disabled
- Transactions aren't categorized yet
#Tips
- Review burn rate monthly—catch issues early
- Compare to revenue: high burn with high revenue growth might be the right strategy
- Plan for spikes: quarterly taxes, annual renewals, seasonal hiring
- Share with your team: financial visibility helps everyone make better decisions