Running out of cash is one of the most common ways startups die, and it’s almost always preventable. Founders who know their numbers make better decisions and raise money on better terms.
Bookkeeping basics
- Separate accounts: never mix personal and business money.
- Accounting software from day one, with every invoice and expense recorded and receipts stored.
- Monthly close: reconcile bank statements, review the profit & loss and balance sheet, and check GST and TDS.
- A good CA for tax, GST, TDS and statutory compliance (Level 4).
Burn and runway
- Gross burn: total monthly cash spent.
- Net burn: gross burn minus cash coming in from revenue.
- Runway = cash in bank ÷ net burn.
₹1.2 crore cash ÷ ₹12 lakh net burn = 10 months of runway.
Rule of thumb: start fundraising when you have 9–12 months of runway left. Fundraising often takes 3–6 months, and desperate founders get worse terms.
Cash flow ≠ profit
Profit is what the income statement says. Cash is what’s in the bank. They differ because of:
- Receivables: customers paying in 30, 60 or 90 days. Large Indian enterprises can be slow payers.
- Inventory: cash tied up in stock.
- Advance payments, GST credits and capital expenditure.
A business can be profitable and still run out of cash. Manufacturing and B2B businesses (like Zetwerk’s) must manage working capital carefully.
The 13-week cash forecast
List every expected inflow and outflow, week by week, for the next 13 weeks. Update it weekly. It’s the single best early-warning system a founder can have.
Improving cash flow
- Invoice immediately and follow up on collections.
- Ask for advances or deposits, and offer early-payment discounts.
- Negotiate longer payment terms with suppliers.
- Consider invoice discounting (for example, TReDS for MSME receivables from large buyers).
- Keep fixed costs low until revenue is predictable.
Your takeaway
Know your runway to the month and forecast cash weekly. Next: build a simple 3-year financial model.