How to Manage Cash Flow and Budgets

Cash flow management is not a finance department activity, it is a survival skill for early-stage founders. Even profitable companies can shut down if they run out of cash. You don’t need a CFO, just clear visibility into what’s coming in, what’s going out, and how long you can stay alive without new funding. This guide will show you how to set up a simple but effective system to manage your runway, avoid surprises, and make better decisions with your limited resources.
Step 1: Understand What Cash Flow and Runway Actually Mean
Cash flow is the movement of money in and out of your startup. Think of it as your bank balance behavior over time.
- Positive cash flow means you’re bringing in more money than you spend.
- Negative cash flow means you’re spending more than you’re earning.
Runway is how many months your startup can survive with the current bank balance and burn rate.
- Burn rate is the amount of money you spend every month.
- For example, if you have $120,000 in the bank and spend $10,000 a month, your runway is 12 months.
Tip: Always calculate runway assuming no new revenue or funding unless you’re already seeing consistent, predictable cash inflow.
Step 2: Build a Simple Cash Flow Tracker
You don’t need a full accounting system to start. Google Sheets or Excel works perfectly for early stages. Here’s how to set it up:
1. List Monthly Income:
Include only confirmed or recurring revenue. Don’t count promises or leads.
2. List Monthly Expenses:
Break them down into:
- Fixed costs (salaries, rent, software subscriptions)
- Variable costs (freelancers, marketing, server usage)
- One-time or irregular costs (equipment, legal fees)
3. Calculate Net Burn:
Net burn = total revenue - total expenses
4. Track Bank Balance and Runway:
Add your current bank balance and divide it by your average monthly burn to calculate runway.
Template to Use:
Budget & Runway Tracker by YC
Step 3: Review Weekly, Not Monthly
Set a calendar reminder every Friday or Monday to spend 30 minutes reviewing your cash flow.
- Update actuals for the past week (revenue and expenses)
- Compare your spending to your planned budget
- Recalculate your runway
This habit will help you catch problems early. Founders who look at finances only at month-end often miss warning signs.
Tool Tip:
If you want automation later, try:
- Runway (YC-backed tool to visualize burn and projections)
- LiveFlow (syncs live data from QuickBooks into Google Sheets)
- Fathom for more visual cash flow analysis
Step 4: Create a Lean Monthly Budget
A budget is just a spending plan. For early-stage startups, keep it very lean and flexible.
Steps:
- Define your must-have monthly expenses (non-negotiables)
- Add essential growth activities (ads, contractors, tools)
- Reserve a buffer for unexpected items (legal, cloud spike, etc.)
Focus your budget on activities that contribute directly to learning or revenue.
Book to Read:
Profit First by Mike Michalowicz — a founder-friendly approach to budgeting that prioritizes healthy cash management over vanity growth.
Step 5: Make Spending Decisions Using ROI Thinking
Before spending on anything, ask:
- What is the specific outcome this will drive?
- Is there a cheaper or free way to test it first?
- Can I pause or cancel this if it doesn’t work?
Keep a “pause list” of tools, contractors, or ads that you can cut immediately if your revenue slows down. This gives you agility during tough months.
Tool to Audit Subscriptions:
Use Cledara or Zluri to track and manage all SaaS subscriptions.
Step 6: Create a 6-Month Financial Forecast
Once you have a working cash tracker and a basic budget, build a forecast to model different scenarios.
- Best-case: growing revenue with current burn
- Base-case: flat revenue, slow spending increase
- Worst-case: revenue drops or flat, costs rise
Update the forecast every 1 or 2 months as actual numbers come in. This helps you plan for fundraising or cost-cutting early, not when you’re panicking.
Tool Tip:
Forecast or Finmark make scenario modeling easier for non-finance founders.
Final Thoughts
Managing cash flow and budgets doesn’t require a finance degree, just discipline and transparency. The earlier you get comfortable with these tools, the more confident you’ll be in your decision-making. Founders often underestimate how much peace of mind comes from knowing their numbers. A good cash flow tracker is not just about surviving, it’s about knowing when you can take bold bets—and when you should wait.
Keep it simple, review it weekly, and make it a habit. It’s one of the few habits that truly separates good startups from ones that quietly die.