What is days cash on hand and how to calculate it?

Days cash on hand (DCOH) is a liquidity metric measuring how many days your company can continue operations using only available cash and cash equivalents, assuming zero additional cash inflow. No new revenue, no new funding, just what's in the bank. It's a survival metric, and for startups operating in uncertain markets, it's one of the most important numbers on your dashboard.

The calculation is straightforward. You take your cash and cash equivalents in the numerator. These are highly liquid assets like treasury bills, commercial paper, and money market funds. The denominator is your average daily cash operating expenses, which you get by taking your annual operating expenses, removing non-cash items like depreciation and amortization, and dividing by 365.

What makes this metric valuable is its directness. Balance sheet ratios like the current ratio or quick ratio give you a snapshot of liquidity, but they don't answer the question founders and finance teams actually need answered. Days cash on hand does. It tells you how long you can operate before the money runs out, which makes it essential for decisions about hiring, marketing spend, product development, and fundraising timing.

The core formula is straightforward:

Days Cash on Hand = (Cash + Cash Equivalents) / Average Daily Cash Operating Expenses

The tricky part is getting the inputs right. For the numerator, you're counting cash on hand and demand deposits plus anything that qualifies as a cash equivalent. Under U.S. GAAP (ASC 230), cash equivalents must meet three criteria. They need to be readily convertible to a known amount of cash, carry insignificant risk of value changes, and have original maturities of three months or less. Think money market funds and short-term treasury bills, not your stock portfolio.

For the denominator, you need your average daily cash operating expenses. Start with your annual operating expenses, which includes rent, utilities, R&D, marketing, and salaries. Then subtract depreciation and amortization because those are accounting entries, not actual cash leaving your account. Divide what's left by 365 and you have your daily cash burn.

Average Daily Cash Operating Expenses = (Annual Operating Expenses - Depreciation - Amortization) / 365

Getting this wrong is common. If you forget to exclude non-cash items, you'll inflate your denominator and understate how much startup runway you actually have. That's a dangerous mistake when you're planning your next round of fundraising.

Numbers make more sense in context. Here's how the calculation plays out at different funding stages.

Example 1: Post-seed startup with $2M USD cash

A 15- to 20-person company in initial product development holds $2,000,000 USD in cash after closing a seed round. Monthly operating expenses run $166,667 USD, which translates to annual operating expenses of $2,000,000 USD.

Daily cash outflow: ($2,000,000 ÷ 365) = $5,479

DCOH calculation: $2,000,000 ÷ $5,479 = 365 days cash on hand (12 months runway)

That might sound comfortable until you remember that most seed-to-Series-A timelines now stretch past two years. This founder needs to either start fundraising immediately or find ways to cut burn.

Example 2: Series A company with aggressive scaling

A 50- to 75-person company raised $10,000,000 USD and is actively scaling sales and product development. Monthly operating expenses have climbed to $1,000,000 USD as the team grows.

Daily cash outflow: ($12,000,000 ÷ 365) = $32,877

DCOH calculation: $10,000,000 ÷ $32,877 = 304 days (approximately 10 months runway)

Notice what happened. The Series A company raised five times more capital, yet it has less runway because its burn rate grew faster than its cash position. This is why tracking this metric monthly is critical, especially during periods of aggressive hiring.

There's no single number that works for every company. Your target depends on your stage, your industry, and how long it will realistically take you to raise your next round.

That last point matters more than most founders want to admit. The timeline between funding rounds has stretched considerably over the past few years. A 2025 report from Fenwick found that the median time between venture rounds is now 23 months, up steadily since 2021. That shift has changed runway planning for startups at every stage. This extension has major implications for startup fundraising timelines and creates a cascading effect on runway planning.

DCOH benchmarks by stage

At the seed stage, plan for 24 months or more. Carta's 2025 State of Seed analysis shows the average time from seed to Series A now exceeds two years, compared to 1.5 years back in 2019. A 12 month runway with plans to start raising in six months doesn't leave much room for things to take longer than expected. And they usually do.

Series A companies should aim for 18 to 24 months at minimum. Increasingly, startup advisors recommend pushing that to 24 to 36 months. The extra buffer protects you from fundraising delays, gives you leverage in negotiations, and lets you focus on building instead of scrambling.

Later stages aren't any more forgiving. Series B and beyond come with higher operational complexity and longer paths to the next milestone. If anything, you need more cushion, not less. Target 24 to 36 months.

DCOH benchmarks by industry

Runway benchmarks vary significantly by industry vertical due to different development timelines and capital requirements. Biotech and life sciences companies typically target 18 to 24 months minimum according to K38 Consulting, which reflects their extended R&D cycles, regulatory approval processes, and clinical trial timelines. Deep tech and hardware startups face even longer timelines that often require 24 to 36 months or more due to prototype development costs, manufacturing setup, and longer sales cycles.

SaaS operates differently. The key variable is your customer acquisition cost payback period, which tells you how long your cash stays locked up before a customer becomes profitable. Enterprise SaaS companies often have 18 to 24 month payback periods, which is sustainable because lifetime value is high. But it also means you need more cash on hand to fund growth. Product-led companies targeting SMBs can often achieve 6 to 12 month payback, which lets them operate with tighter cash buffers because money cycles back into the business faster.

The common thread across all stages and industries is this. Whatever runway felt safe three years ago probably isn't enough today.

Improving days cash on hand means working both sides of the equation. You either increase the cash you have or reduce the rate at which it leaves. Most finance teams focus heavily on the second part and underinvest in the first.

But before tactics, the most important thing you can do is pay attention. Finance teams that manage liquidity well calculate days cash on hand at least monthly, and weekly during periods of rapid growth or market uncertainty. The companies that survive downturns tend to see cash constraints six months out, not six weeks out. Regular monitoring is what creates that visibility.

Accelerate cash collection to improve working capital

Money owed to you doesn't extend your runway. Money in your account does. The gap between those two numbers is your days sales outstanding, and shortening it is one of the fastest ways to improve your cash position without cutting anything.

Start by automating invoicing and payment reminders to reduce days sales outstanding (DSO) and can help improve working capital. Manual follow-up is slow and inconsistent. Offer early payment discounts like 2/10 net 30 to give customers a reason to pay faster. Use accounts receivable aging reports to spot which invoices are slipping and follow up systematically.

These aren't dramatic moves, but they compound. Reducing your days sales outstanding by even a week or two makes a meaningful difference over a year.

Extend accounts payable terms strategically

The flip side of collecting faster is paying slower. This doesn't mean stiffing your vendors or damaging relationships. It means tracking your accounts payable metrics and negotiating terms proactively rather than accepting whatever default is on the contract.

The key is negotiating extended terms proactively rather than reactively. Companies with strong supplier relationships often work out terms that benefit both sides. The goal is to align when you pay vendors with when you collect from customers. That reduces the gap in your cash conversion cycle and keeps more money in your account longer.

Reduce burn rate without cutting headcount

Cutting headcount is the obvious lever for reducing burn, but it's rarely the first one you should pull. Often there's meaningful savings hiding in plain sight.

Review your fixed versus variable cost mix quarterly to understand where you have flexibility. Renegotiate recurring contracts annually instead of letting them auto-renew. Audit your software subscriptions every quarter to catch redundant tools. A 2021 Gartner report found that 25% of software budgets go to overlapping or unused tools. That's real money you can reclaim without touching headcount.

Use rolling cash flow forecasts for visibility

A single days cash on hand calculation tells you where you are. A rolling forecast tells you where you're headed.

Finance leaders at high-growth companies should run weekly cash flow forecasting that covers both the near term, 30 to 90 days out, and the longer horizon of six to 12 months. Build in scenario planning so you can model different growth trajectories and see how each one affects your runway. When your forecast connects directly to your startup accounting software, you eliminate manual data entry and get a cash position that reflects reality, not last month's numbers.

Optimize idle cash to maximize yield

Cash sitting in a checking account earning nothing is a missed opportunity. Short-term investments and high-yield cash management accounts can generate meaningful returns while keeping your money accessible.

Evaluate your options based on three factors. How much yield can you earn, how quickly can you access the funds, and how well does it integrate with your existing software stack? Traditional money market accounts offer lower returns but often fit neatly into your banking setup. Treasury management software platforms may offer higher yields with same-day liquidity. The right choice depends on your specific needs, but doing nothing is the wrong choice.

None of these tactics work in isolation. The real gains come when cash management operates as connected discipline rather than a checklist of one-off improvements.

Faster collections mean more cash on hand. Smarter payables timing means that cash stays longer. Rolling forecasts help you spot problems early enough to act. Optimizing idle cash ensures every dollar earns something while it waits. Each piece makes the others more powerful.

The companies that keep healthy runway through uncertain markets aren't doing anything exotic. They're just disciplined about connecting these dots.

Brex helps finance teams do exactly that. Business banking accounts earn interest on idle cash while maintaining same-hour liquidity. Real-time spend tracking gives your finance team immediate visibility into burn rate, and automated expense management reduces operational costs without adding finance headcount.

Parker Schlank, Chief Operating Officer at ILT Academy, explains how Brex transformed their treasury management: "With Brex, I don't have to think about banking or treasury. Our HubSpot enterprise subscription is pretty much covered by our Brex yield."

Signup for Brex to see how integrated cash management extends your runway.