Quick answer
Cash runway is the number of weeks your business could keep paying its essential costs if no new money arrived. Add up what you must pay each week, including wages, rent, GST and PAYE set-asides, then divide the cash you hold by that figure. Many owners aim for several weeks of cover and lengthen it by trimming costs, speeding up payments and arranging a standby cash line.
Key points
- Runway = cash on hand divided by essential weekly costs.
- Count only what you must pay, not what you would like to pay.
- Seasonal trades need a longer runway to cross the quiet months.
- A standby cash line can add weeks without selling anything.
Ask a business owner how the business is going and you’ll hear about sales, customers and the next job. Ask how many weeks they could keep the doors open if no more money came in, and the room often goes quiet. That number is your cash runway, and it’s one of the most useful figures a small business can know.
It turns a vague worry into something you can count, compare and improve.
What is cash runway?
Cash runway is the length of time, usually in weeks, that your available cash would cover your essential costs if takings stopped. It isn’t a forecast of failure. It’s a measure of how much room you have to cope with a slow patch, a late customer, a broken machine or a quiet January.
The calculation is short:
Runway in weeks = cash available ÷ essential costs per week
The work is in getting each side right.
Step 1: Count the cash you really have
Start with the balance in your business accounts, then adjust it honestly:
- Take out GST you’ve collected. It’s Inland Revenue’s, and it will leave the account on the 28th after your period ends. Our page on the GST return crunch shows how often it catches people out.
- Take out PAYE and KiwiSaver deductions that have been withheld but not yet paid.
- Take out provisional tax you’ve set aside for the next instalment.
- Add only money that is certain, such as invoices already promised for this week, if you want a second, more generous figure.
What’s left is spendable cash. For many owners the number is smaller than the bank balance suggested.
Step 2: Count what you must pay each week
List the costs that continue whether or not sales arrive:
| Cost | How to count it weekly |
|---|---|
| Wages and KiwiSaver | Gross wages plus employer contribution, per week |
| Rent and outgoings | Monthly figure × 12 ÷ 52 |
| Loan and finance repayments | Monthly repayment × 12 ÷ 52 |
| Insurance | Annual premium ÷ 52 |
| Supplier bills you can’t avoid | Average weekly spend |
| Power, phone, internet, software | Monthly figure × 12 ÷ 52 |
| Tax set-asides | GST, PAYE and provisional tax, averaged weekly |
Leave out anything you could pause in a crisis, such as marketing campaigns or new equipment. The goal is a survival figure, not a wish list.
Not sure of the number? Start a quick enquiry and we’ll help you size the cover you’d need.
Step 3: Do the sum
Illustrative only. A café in Wellington holds $38,000 after setting aside tax. Wages, rent, loan repayments, insurance and unavoidable supplier spend add up to $9,500 a week.
$38,000 ÷ $9,500 = 4 weeks of runway.
That tells the owner something concrete: four weeks of silence from customers would empty the account. It also shows where to look for improvement.
What counts as a healthy runway?
It depends on how predictable your income is:
| Business type | A sensible starting target |
|---|---|
| Steady subscription or contract income | 4 weeks or more |
| Retail with regular daily takings | 4 to 8 weeks |
| Trades paid on invoice terms | 6 to 10 weeks |
| Seasonal tourism or hospitality | Enough to cross the quiet months |
| Businesses with big lumpy contracts | 8 weeks or more |
These are starting points, not rules. A New Zealand ski-field supplier and a suburban dentist face very different shapes of year. Use the numbers to start a conversation with your accountant.
Three ways to lengthen your runway
1. Trim essential costs
Review rent, subscriptions and supplier terms. Sometimes a small, permanent saving adds more weeks than a one-off cash injection.
2. Bring cash in sooner
Shorter payment terms, deposits and quicker follow-up all move money earlier. Our guide on getting invoices paid faster goes through the practical steps.
3. Add a standby facility
A business cash line set up while the business is healthy gives you somewhere to draw from in a lean patch. Set it up before you need it, because lenders look more kindly on steady trading than on a business already in a squeeze.
Seasonal businesses: count the trough
If takings fall hard for a few months, a single weekly average hides the problem. Calculate runway at the start of your quiet season, not at the calendar average:
- Estimate takings for each week of the quiet period.
- Subtract essential costs for each week.
- Keep a running total.
- The lowest point is the cash you need to have in hand, or ready to borrow, before the season starts.
Our page on seasonal business cash flow walks through this for trades with a pronounced low season, including the January shutdown.
When a short runway is a warning
A runway under about four weeks isn’t a verdict. It’s a signal to act early while you have choices:
- Chase overdue invoices now, not next month.
- Ask suppliers for longer terms.
- Defer discretionary spending.
- Talk to a lender before the account is empty, not after.
The earlier you act, the cheaper your options are. A week of notice can mean a cash line; a day of notice can mean a very expensive scramble.
Using runway to make decisions
Once you know your number, other choices get easier:
- Hiring. Will the extra wage cut the runway below your comfort level?
- Big purchases. Does a new van shorten the runway by three weeks? Is there a cash option that avoids that?
- Taking the owner’s drawings. How many weeks of cover do you give up?
- Saying yes to a large but slow-paying customer. Can you fund the wait?
Make it a habit
Put a reminder in your calendar for the first Monday of each month. Update the balance, the weekly costs and the runway figure, and note it next to last month’s. After a few months you’ll see the pattern, and surprises become rare.
Two quick worked variations
Try the sum twice. First with today’s cash only, to see the bare minimum. Then add the unused part of any standby line and any invoices that are certain to be paid this month, to see a more generous figure. If the first number is three weeks and the second is seven, you know a late customer will not sink you but a lost one might. Repeat after any big change, such as a hire, a new lease or a price rise. The point is not to find a perfect number, but to track whether you are moving in the right direction each month.
Know your number, then plan
If your runway is shorter than you’d like, or you can see a pinch point ahead, it’s worth asking about cover before you need it. The enquiry takes about a minute, there’s no credit check to ask, and your details stay with one team rather than a crowd of lenders. A real person looks at your numbers and calls you.
Please give accurate figures for monthly takings and commitments, which lets us suggest something that really fits.
Frequently asked questions
What is a healthy cash runway for a small business?
There's no universal number. Many owners aim for at least four to eight weeks of essential costs, and seasonal businesses often want more to cross their quiet months. The right figure depends on how predictable your takings are.
Should GST be part of my runway?
Treat GST you have collected as owed, not as available cash. Leave it out of your balance, or count it as a cost, so the runway isn't flattered by money that belongs to Inland Revenue.
How often should I recalculate it?
Monthly is a good habit, and weekly when cash is tight. It takes ten minutes once you have the template set up.
Does a cash line count toward runway?
Unused limit on a standby facility is a source of cash you can draw, so many owners add it as a separate line. Keep it distinct from money in the bank so you can see both.