Bill Hanna, CPAAccounting Leader Driving Financial Excellence

Why is Net Loss higher than Cash 🔥 Burn??

24 Apr 2026 · 1 min

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In this Finance Bites video, CPA Bill Hanna explains why a company's net loss can be significantly larger than its cash outflow. He clarifies that net loss is an accrual‑based measure that incorporates non‑cash items, timing differences, and accounting rules, while cash burn reflects the actual cash inflows and outflows with no accounting adjustments. Hanna emphasizes that savvy CFOs use net loss to assess whether the business model works, but rely on cash burn to gauge survivability and to plan future financing. The video ends with a call to subscribe for more short finance insights.

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This business has a net loss of $3 million while cash outflow of just $1 million. Good CFOs understand the difference between net loss and cash burn because net loss tells you if the business works and cash burn tells you if the business is going to survive. So why are these two numbers so different? Well, because net loss is accrual-based and includes some non-cash items, timing, and accounting rules. While with cash burn, it only has money in and money out. No opinions, no accounting rules. It's simply based on the cash that's coming in and going out of the business. So great CFOs understand the economics of net loss, but they use cash burn to plan the future of the business. If you're looking for more of these Finance Bites, go ahead and subscribe to the channel.