High-Yield Cash Management: A Simple Three-Bucket Approach for Startups to Extend Runway

High-Yield Savings for Startup Cash Management

After a fundraise, your company's bank account holds more cash than it ever has. Yet, this capital often sits idle in a standard business checking account, earning little to no interest and losing value to inflation. Finding the best place to keep startup cash is a critical part of capital preservation. Effectively managing this idle cash is a problem of diligence, not greed. The goal is not to chase high returns, but to prudently extend your runway without adding risk. For founders at SaaS, Biotech, or Deeptech startups, this is a core responsibility.

The challenge is balancing safety, liquidity, and yield without creating an administrative burden for a team that lacks a dedicated CFO. This process, known as startup treasury management, can add months to your operational runway with a simple, structured approach. This guide focuses on capital preservation; see our SaaS runway guide for revenue-focused strategies.

The Core Goal: A Simple Framework for Your Cash

Before choosing an account, the first step is to segment your cash based on its purpose and timeline. A disciplined approach prevents you from putting capital needed for next week’s payroll into an instrument with lower liquidity. What founders find actually works is a three-bucket framework that aligns your cash with your operational needs.

• Operating Cash (0-60 Days): This is the money in your primary checking account used for payroll, rent, and vendor payments. It must be instantly accessible. Keep enough to cover at least 30 to 60 days of your burn rate, plus a comfortable buffer.
• Reserve Cash (2-18 Months): This is the bulk of your runway. It does not need to be available today, but you need reliable access to it within a few days without risk of principal loss. This is the cash you want to optimize for yield.
• Strategic Cash (18+ Months): This bucket is for capital with a long-term horizon, such as funds earmarked for a future acquisition or major capital expenditure. This is the only portion of your cash that might be allocated to higher-risk, higher-return investments, a topic beyond this discussion.

This framework is about risk management. It separates day-to-day capital from the core runway, allowing you to safely earn a return on the reserve portion while ensuring immediate obligations are always met.

Choosing the Right Tool for Your Reserve Cash

With your cash segmented, you can find the right home for your reserve bucket. Comparing interest rates for business accounts is important, but for founders, security and liquidity management should always come first. The main safe places to park startup funds are High-Yield Savings Accounts (HYSAs), Government Money Market Funds (MMFs), and U.S. Treasury Bills (T-Bills).

High-Yield Savings Accounts (HYSAs)

HYSAs are the simplest option and a great starting point for many early-stage businesses. Offered by online banks and fintech platforms, the best business savings accounts for startups provide a competitive interest rate with strong security. For US companies, these accounts are typically protected because FDIC insurance covers up to $250,000 per depositor, per institution. In the UK, the Financial Services Compensation Scheme (FSCS) offers similar coverage up to £85,000. For startups with cash balances beyond the standard insurance limits, many modern fintech platforms use FDIC insurance networks (such as IntraFi) to provide multi-million dollar FDIC coverage by spreading deposits across multiple partner banks. This solves a major pain point for companies managing a recent fundraise. Liquidity is reliable, with funds typically available in one to three business days. A key friction point was removed in 2020 when Regulation D, which previously limited certain savings withdrawals to six per month, was suspended.

Government Money Market Funds (MMFs)

Often available through brokerage or treasury management platforms, money market fund options for startups can offer a step up in yield and liquidity. As defined under Rule 2a-7, Government Money Market Funds invest almost exclusively in U.S. government debt and repurchase agreements, making them a very low-risk asset class. Instead of FDIC insurance, accounts holding MMFs are typically covered by SIPC. It’s crucial to understand that SIPC protection covers up to $500,000 (including $250,000 for cash) against brokerage failure, not against a decline in the fund's value. However, government MMFs are structured to maintain a stable $1.00 net asset value (NAV), making a loss of principal exceptionally rare. For startups, the key advantage is liquidity; on modern platforms, MMFs often provide T+0 (same-day) or T+1 (next-day) access to cash, which is faster than most HYSAs.

U.S. Treasury Bills (T-Bills)

For ultimate security, T-Bills are unmatched, as they are backed by the 'full faith and credit' of the U.S. government. These are short-term debt instruments sold at a discount that mature to their face value, with common durations of 4, 8, and 13 weeks. While founders can buy T-Bills directly and build a "ladder" to ensure consistent cash availability, the process is operationally complex. A T-bill ladder involves staggering the maturity dates of multiple bills so that cash becomes available at regular intervals. Many startups now access T-Bills through specialized treasury platforms that automate the purchasing, laddering, and management process, combining high security with operational ease.

Putting It Into Practice: Automation and Reconciliation

Choosing the right account is only half the battle. The goal is operational simplicity, which means minimizing manual work for founders and small operations teams. This is where automation and streamlined bookkeeping become essential, addressing the headache of setting up sweeps and reconciling interest income.

Modern treasury management platforms offer rule-based transfers, or "sweeps," that automate the movement of cash between your buckets. For example, you can set a rule: 'Maintain a $100,000 floor in the primary checking account; sweep any excess cash to the money market fund daily.' This ensures your operating account is always funded for expenses while maximizing the capital that is earning a return. For an e-commerce company using Shopify, this means excess cash from daily sales can be put to work automatically instead of sitting idle.

Reconciliation is another critical piece. Interest income must be recorded correctly for accurate financial reporting under US GAAP or FRS 102. In practice, this is straightforward. At the end of each month, the interest earned is recorded in your accounting software. For US startups using QuickBooks, this is a simple journal entry: you debit your cash account and credit an "Interest Income" account on your chart of accounts. For UK startups using Xero, the process is identical. The best platforms provide clear monthly statements and can even integrate directly with QuickBooks or Xero, posting the journal entry for you and eliminating manual data entry. Note that for British companies, UK deposit protection is handled by the FSCS.

Practical Takeaways for Founders

For a founder, optimizing cash is not about becoming a financial trader. It's about implementing a simple, safe system to protect and extend your runway. The best business savings accounts for startups are the ones that fit a disciplined strategy and do not add operational complexity.

1. Segment Your Cash: First, implement the three-bucket framework to separate cash by its purpose and required liquidity. This is the foundation of sound startup treasury management.
2. Choose Your Tool: Select an account based on your cash balance and operational needs. If your reserve cash is less than the FDIC or FSCS insurance limit, a business HYSA is an excellent, simple start. If you are managing a multi-million dollar Series A or B round, a treasury platform offering MMFs with extended FDIC coverage and automated sweeps is likely the better choice.
3. Automate and Simplify: Finally, ensure your process for managing and reconciling your funds is simple and, ideally, automated. This will help you avoid creating downstream bookkeeping issues that can become a problem during audits or future fundraising rounds.

By taking these deliberate steps, you can make your cash work for you, strengthening your company’s financial position with minimal effort.

Frequently Asked Questions

Q: What is the real difference between FDIC and SIPC insurance?
A: FDIC insurance protects your deposits in a bank account against bank failure, up to $250,000. SIPC insurance protects your securities (like MMFs) and cash held at a brokerage firm against the firm's failure, up to $500,000. SIPC does not protect against a decline in the market value of your securities.

Q: Are government money market funds completely safe?
A: Government MMFs are considered one of the safest investment options available because they invest in short-term U.S. government debt. While they are not FDIC-insured, they are subject to strict regulatory rules to maintain a stable $1.00 share price, making a loss of principal extremely rare.

Q: How quickly can I access cash from these high-yield options?
A: Liquidity varies by product. A business HYSA typically provides access to your funds in one to three business days. Many money market funds offered on modern treasury platforms provide faster access, often on the same day (T+0) or the next business day (T+1), which is ideal for urgent cash needs.

Q: Do I need a CFO to implement a startup treasury management strategy?
A: No. While a CFO will manage a more complex strategy, the three-bucket framework is designed for simplicity. Using modern fintech platforms with automated sweeps and accounting integrations allows founders or small ops teams to manage cash effectively without deep financial expertise or a large time commitment.