After a raise, a startup can hold more cash than it will spend for two years. Where that cash sits is a risk decision before it is a yield decision. The aim is simple: the money is there when payroll runs, it is not concentrated in one place that can fail, and someone can explain where every dollar is on any given day.
The three buckets
| Bucket | Purpose | Typical home |
|---|---|---|
| Operating | Payroll, vendors, taxes for the next 60 to 90 days | Primary operating bank account |
| Reserve | The next 6 to 12 months of burn | Insured cash sweep, Treasury bills, government money market funds |
| Strategic | Runway beyond 12 months | Laddered Treasury bills or notes matched to the forecast |
The 13-week cash forecast sets the size of the operating bucket. The operating model sets the reserve and the ladder.
Know what is insured
FDIC deposit insurance covers deposits up to $250,000 per depositor, per insured bank, for each ownership category. A company with $8,000,000 in a single operating account at one bank has most of it uninsured. Common responses:
- Insured cash sweep programs. The bank spreads deposits across a network of banks so each slice stays within the insurance limit. Read the program terms: which banks, how quickly funds come back, and whether you can exclude banks where you already hold deposits.
- Treasury bills. Direct obligations of the U.S. government, sold at a discount and maturing in weeks to a year. Held through a brokerage account in the company's name, they are not bank deposits at all.
- Government money market funds. Funds that invest in government securities and repurchase agreements. They are not FDIC insured; read the prospectus for what the fund holds.
- A second banking relationship. A backup operating account at another institution, with payroll able to run from it, removes single-bank dependency.
A worked allocation
A company closes a $12,000,000 round and burns $450,000 a month.
| Holding | Amount | Reason |
|---|---|---|
| Operating account, Bank A | $1,200,000 | About 2.5 months of burn plus a tax buffer |
| Backup operating account, Bank B | $250,000 | Payroll continuity |
| Insured cash sweep | $3,000,000 | Six months of reserve, same-day access |
| Treasury bill ladder (3, 6, 9, 12 months) | $7,550,000 | Matures as the forecast needs it |
The written policy
A one-page treasury policy, approved by the board, covers:
- Allowed instruments and the maximum maturity
- Limits per bank and per fund
- Who can open accounts, move money and approve wires (two people for anything over a set amount)
- How often the board sees a cash and investments summary
Controls that matter
- Dual approval on wires and new payees
- Positive pay or payee verification on outgoing payments where the bank offers it
- Monthly reconciliation of every account, including the brokerage account
- Interest income recorded each month, not in a lump at year end
We set up the policy with your leadership, build the cash report your board sees, and reconcile every account at each close.
Sources
- FDIC, Deposit insurance
- FDIC BankFind Suite (confirm a bank is FDIC insured)
- TreasuryDirect, Treasury bills
Questions founders ask
How much should sit in the operating account?
Enough to cover the next two to three months of payroll, vendors and taxes, with the rest held in instruments chosen for safety and liquidity first and yield last.
Does a startup need a board-approved treasury policy?
It is good practice once the company holds more than a few months of runway. A short written policy sets which instruments are allowed, the limits per institution and who can move money.
