Cash runway for a small agency: a 20-minute monthly check

In this guide, runway is the number of months your projected month-end balance stays at or above a minimum buffer. It counts only signed work, and it treats money held for tax as spoken for.

You need four things: bank balances, open and planned invoices with each client's payment history, regular bills, and an estimate of the tax you owe. The first run takes longer while you build the lists. After that, the check is mostly updates.

The check in six steps

Step 1: Opening cash, minus the tax pot

Start with the cleared balance of every business account on the first of the month, including any tax account. Leave out credit card limits and unused credit lines: they are borrowing, not cash.

Then take out the tax pot. This is money that belongs, or soon will, to a tax authority. It includes sales tax, VAT or GST you've collected, payroll taxes withheld but not yet paid, and tax you expect to owe on income already earned. Keep it as a separate pot, ideally in its own account, so it never looks like money you can spend.

Two rules keep the pot honest:

• The pot is what you owe, not what you've saved. If you estimate you owe US$15,000 and the tax account holds US$12,000, the pot is US$15,000.
• Fill it as money arrives. Treat the monthly transfer into the pot as a committed outflow in step 2. Tax payments then come out of the pot, not out of your runway.

How much to set aside, and when payments are due, are questions for your accountant; this guide doesn't give tax advice. Payments can fall due several times a year: in the US, for example, the IRS divides the year into four payment periods for estimated tax.

Opening cash minus the tax pot is your available cash.

Step 2: Committed and flexible outflows

List what you expect to pay in each of the next six months, and sort every line into one of two groups.

Committed outflows are the ones you'd still pay if a client left tomorrow. They include salaries, payroll taxes and benefits, rent, loan repayments, contractors on signed agreements, subscriptions you can't cancel mid-term, insurance and the transfer to the tax pot. The owner's base pay belongs here too.

Flexible outflows are the ones you could stop or delay within a month without breaking an agreement. They include marketing, travel, training, equipment, bonuses, owner drawings above base pay, and hires you haven't made yet.

Put annual and quarterly bills in the month they fall. An insurance renewal spread evenly across the year hides the month the money actually leaves.

The split matters because flexible outflows are your first lever. When the line gets tight, they are what you can change this month.

Step 3: Receipts by expected date, not invoice date

List every receipt you expect in the next six months: open invoices, plus invoices you'll send for signed work, such as retainer months and project milestones. Put each one in the month you expect the money to arrive, not the month you send the invoice.

Count rolling retainers until notice is given, and fixed-term work to the end of its term. Leave out proposals, verbal yeses and renewals that aren't signed. They belong in your sales pipeline, not in this check.

That makes runway conservative on purpose: it assumes you sell nothing new. It tells you how long you have to sell.

Step 4: The late-payer adjustment

For each client, look at the last six paid invoices and count the days from invoice to payment. Use the middle value, the median, so one odd payment doesn't skew it. Then set each expected date to the invoice date plus that client's usual days to pay.

A client on 30-day terms who usually pays in 50 days goes in 50 days after the invoice. That often moves the money into the following month.

Two more rules:

• New client, no history. Use your terms plus the typical delay across your other clients.
• Doubtful invoices. If an invoice is disputed or long overdue (pick a cutoff, such as 60 days past due), leave it out. Count it when it arrives.

Step 5: A minimum buffer

The buffer is the balance you don't plan to go below. It absorbs what the lists miss: a late payment, a surprise bill, a slow month.

There is no universal right size. A practical starting point is the higher of two figures:

• One month of committed outflows.
• The largest single receipt you expect in the next two months.

The second figure matters when one client is a large share of your fees. If that client pays late, the buffer should still cover the gap.

Step 6: Runway in months

Build the six-month line. Each month's closing balance becomes the next month's opening balance.

Available cash  = bank balances − tax pot
Closing balance = opening balance + expected receipts
                  − committed outflows − flexible outflows
Runway          = months, from now, that the closing balance
                  stays at or above the buffer

If the balance never drops below the buffer within six months, write "6+ months" and look further ahead next time.

Any spreadsheet can hold this. Three tabs are enough:

• Receipts: client, amount, invoice date, usual days to pay, expected date.
• Outflows: item, committed or flexible, month, amount.
• Six-month line: both lists totaled by month, with the closing balance and the buffer check.

A worked example (fictional)

Fictional example. Kestrel Lane Studio is not a real business. The clients and figures below are illustrative and are not a customer result.

Kestrel Lane is a four-person design and web studio that bills in US dollars. On October 1 it has US$81,000 in the bank: US$69,000 in its operating account and US$12,000 in a tax account. Its accountant puts tax owed on income to date at US$15,000. So the pot is US$15,000, and available cash is US$66,000. The studio moves the missing US$3,000 into the tax account that day.

Committed outflows are US$35,000 a month:

• US$28,000 for salaries, payroll taxes and benefits, including the owner's salary
• US$2,400 rent
• US$900 loan repayment
• US$1,700 for software, insurance, accounting and bank fees
• US$2,000 into the tax pot

January adds US$4,000 of annual renewals. Flexible outflows are US$2,500 a month for marketing, travel, training and equipment.

The buffer is US$35,000: one month of committed outflows, which is more than the largest expected receipt of US$15,000.

Receipts come from four clients:

Client (fictional)	What's signed	Invoiced	Usually pays in	Money arrives
Wrenfield Clinics	Rolling retainer, US$15,000 a month	1st of each month	20 days	Same month
Kittering Software	Rolling retainer, US$9,000 a month, 30 days' notice	1st of each month	25 days	Same month
Oldacre Legal	Retainer, US$6,000 a month, term ends Dec 31	1st of each month	50 days	Following month
Tamsford Foods	Project, three milestones of US$9,000	Oct 1, Nov 1, Dec 1	45 days	Nov, Dec, Jan

Oldacre's payment for September arrives in October, and its last payment, for December, arrives in January. By invoice date, October would show US$39,000 coming in. By expected date it shows US$30,000, because Tamsford's first milestone won't arrive until mid-November.

Here is the six-month line:

Month	Opening	Receipts	Committed	Flexible	Closing	Above buffer?
Oct	US$66,000	US$30,000	US$35,000	US$2,500	US$58,500	Yes
Nov	US$58,500	US$39,000	US$35,000	US$2,500	US$60,000	Yes
Dec	US$60,000	US$39,000	US$35,000	US$2,500	US$61,500	Yes
Jan	US$61,500	US$39,000	US$39,000	US$2,500	US$59,000	Yes
Feb	US$59,000	US$24,000	US$35,000	US$2,500	US$45,500	Yes
Mar	US$45,500	US$24,000	US$35,000	US$2,500	US$32,000	No

The balance stays above US$35,000 through February and drops below it in March, after the Oldacre and Tamsford payments stop. Runway: five months on signed work. That is how long Kestrel Lane has to renew Oldacre or sign new work.

Scenario 1: a client pays 45 days late

Wrenfield, the largest client, pays its October invoice 45 days later than usual. The US$15,000 expected around October 21 arrives in early December.

October closes at US$43,500 instead of US$58,500, and November at US$45,000 instead of US$60,000. Both are still above the buffer. When the payment lands in December, the line rejoins the base case. Runway: still five months.

A one-off late payment moves money. It doesn't remove it. It costs headroom, not runway, and here the buffer did its job: at its lowest, the dip stayed US$8,500 above it.

A habit is different. If Wrenfield paid every invoice 45 days late from now on, each payment would land in the first week of the month after next. Month-end balances would sit US$30,000 lower from November onward. November would close at US$30,000, below the buffer, and runway would fall to one month. When a client's payment pattern changes, update its usual days to pay and rerun the check.

To catch a late payment early, ask a week before the due date whether the invoice is approved and scheduled. If it slips anyway, hold flexible spending and don't add committed costs until it arrives.

Scenario 2: a client leaves

Kittering gives 30 days' notice on October 1. Its October payment still arrives, then US$9,000 a month stops from November. Here are the month-end balances side by side:

Month	Base case	Wrenfield pays 45 days late	Kittering leaves	Kittering leaves, flexible spending cut from Nov
Oct	US$58,500	US$43,500	US$58,500	US$58,500
Nov	US$60,000	US$45,000	US$51,000	US$53,500
Dec	US$61,500	US$61,500	US$43,500	US$48,500
Jan	US$59,000	US$59,000	US$32,000	US$39,500
Feb	US$45,500	US$45,500	US$9,500	US$19,500
Mar	US$32,000	US$32,000	−US$13,000	−US$500
Runway	5 months	5 months	3 months	4 months

Without Kittering, the balance drops below the buffer in January and below zero by March. Runway falls from five months to three.

Cutting all flexible spending from November adds one month. It doesn't replace the client. What restores the runway is new signed work of a similar size, and new work takes time to sign and longer to be paid for. That's why you want to see this in October, not January.

When you model a lost client, take out any outflows that stop with it, such as a freelancer who works only on that account. Staff costs usually carry on. So the cash you lose is the client's fees minus only the costs that leave with it. That is more than the client's contribution before overhead, which also subtracts the cost of staff hours you'll keep paying for. Contribution tells you which clients are worth the hours. This check tells you how long the cash lasts without them.

The 20-minute routine

Once the lists exist, the monthly check runs like this:

1. Update bank balances and the tax pot. About 3 minutes.
2. Mark paid invoices, add new invoices and newly signed work, and set expected dates. About 6 minutes.
3. Update any client whose usual days to pay has changed, and move doubtful invoices out. About 3 minutes.
4. Update committed and flexible outflows for anything that changed. About 3 minutes.
5. Read the runway, and any month that dips close to the buffer. About 2 minutes.
6. Rerun the two scenarios for your largest client. About 3 minutes.

Write the runway figure down each month. A runway that shrinks three months in a row tells you more than any single reading.

What this check doesn't do

• It isn't an accounting report, a cash-flow statement or tax advice. Your accountant owns tax amounts, due dates and how things are recorded.
• It runs on expected dates, so it's an estimate. Compare last month's line with what happened, and adjust each client's usual days to pay.
• It leaves out new sales on purpose. Track your pipeline separately.

A planner for this

The Cash & Runway Planner is in progress. It will show how many months your cash covers, and what happens if a client pays late or leaves. There is no release date yet. You can read what it will do on its page. Until then, the six-month line above works in any spreadsheet.

Sources

• Internal Revenue Service, "Estimated taxes," https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes (accessed Sep 30, 2026)