Your Burn Rate Is Probably Wrong: A Founder's Guide to Accrual Books

Most seed-stage founders check two numbers every week: cash in the bank and monthly burn. Runway is just one divided by the other. The problem is that on a lot of early-stage books, the burn number is quietly wrong, and nobody notices until an investor's diligence team rebuilds it. If you've ever had your runway jump by three months after an annual prepayment landed, or drop sharply because two months of contractor invoices hit at once, this post is for you. Why cash-basis books mislead startups Early on, most startups keep books on a cash basis: revenue is recorded when money arrives and expenses when money leaves. It's simple, and for a while it's fine. Then the business gets slightly more complicated and the numbers start lying: Annual contracts. A customer prepays $60k for a year. Cash-basis books show a $60k month and eleven $0 months. Your revenue growth chart becomes noise. Annual software and insurance. One big payment makes that month's burn look terrible and th