What is Closing Balance?
Nexa Consultancy | Startup & Finance Glossary
The Closing Balance is the amount of money in a company's account at the end of an accounting period, such as a day, month, or year. It is the net result of all transactions (debits and credits) that occurred during that period.
For Startups: The closing cash balance at the end of each month is a critical figure for a startup. It is the starting point for the next month's cash flow forecast and is used to calculate the net burn rate and runway. An accurate closing balance is essential for effective cash management.
Calculation: Closing Balance = Opening Balance + All Inflows - All Outflows.
Example: A company starts the month with ₹20 Lakhs, receives ₹5 Lakhs in customer payments, and spends ₹10 Lakhs on expenses. Its closing balance for the month is ₹15 Lakhs.