Startup Treasury Management: A 3-Tier Plan for Where to Keep Cash

Start from your monthly net burn and how long you want each tier to last. Say you hold $3,000,000 and burn $150,000 a month. In this example, the operating tier is three months of spending, or $450,000, the reserve tier is the next nine months, or $1,350,000, and the strategic tier is the remaining $1,200,000.

Each tier answers a question:

• Operating: can I pay every bill and payroll this quarter with no transfers or sales?
• Reserve: can I cover the following months if a customer pays late or a round slips?
• Strategic: what can safely sit for longer while I decide how to deploy it?

Set the boundaries with your forecast, not a formula. A rolling cash forecast tells you when big outflows arrive, and your board may have views on how many months to hold in each tier.

Match the instrument to the time horizon:

1. Operating tier: business checking and a savings or sweep account with same-day access. No market risk.
2. Reserve tier: insured deposits through a sweep program, government money market funds or short-dated Treasury bills that mature before you need them.
3. Strategic tier: a ladder of Treasury bills or notes and insured certificates of deposit maturing at planned dates.

Insured deposits are protected up to FDIC limits per bank, and a sweep can extend that; see FDIC sweep accounts. Treasury securities are backed by the US government but are not FDIC insured, and money market funds are investments that aren't insured either. Interest from Treasury securities is generally exempt from state income tax, though federal tax applies, so ask your CPA how it affects you.

A one-page investment policy protects you from ad hoc decisions and gives investors comfort. Include:

• The objective, in order: preserve capital, maintain liquidity, then earn yield.
• Approved instruments, and a list of what's prohibited (equities, crypto, corporate bonds, anything you can't explain).
• Concentration limits by institution, and a rule to stay within insurance limits or use a program that does.
• Maximum maturity for each tier.
• Who can move money, approval thresholds and who reviews the policy.
• A review schedule, at least once a year and after each financing.

Larger balances need more detail, which is covered in treasury policy for larger cash reserves. If you have loan covenants, check them, since some require cash to be held at a specified bank.

Add a few control rules as well: two people approve transfers above a set amount, board members get read-only access, and someone confirms insured status each quarter. For the strategic tier, a ladder keeps things simple. Say you hold $1,200,000 you won't need for a year. In this example, you might buy four Treasury bills of $300,000 that mature three months apart, so a portion of the cash comes back every quarter and you can reinvest or spend it as plans change.

Rates move with the market, so look at current quotes instead of trusting a figure from an article. What doesn't change is the trade-off: more yield generally comes with longer maturity, less liquidity or more risk. The extra interest on a reserve is small relative to the loss from a delayed payroll or a forced sale.

Interest also depends on what your provider pays. Fintech banks and card providers describe their programs differently, so compare the yield after fees, how funds are held and how fast you can withdraw. Comparing options such as Brex, Ramp and Navan and treasury tools like Modern Treasury, Trovata and Kyriba helps you decide where to keep and monitor cash.

Run a short checklist:

1. Does each tier still match your burn and runway?
2. Are any balances above insured limits at a single bank?
3. Do maturities line up with planned outflows?
4. Did any approvals or access change (new signers, departed employees)?
5. Is the policy still accurate after your latest financing?

Use the results to move cash between tiers and to update your board. If your business has customers or entities in several banks, consolidate views so nothing is forgotten.