Startup Treasury Management Playbook: Protect Capital, Preserve Liquidity, Boost Cash Yield

US Treasury Management for Startups: A Pragmatic Playbook

The venture capital round has closed, the wire has hit, and for the first time in a while, the company bank account has more than a few months of runway. That initial relief quickly gives way to a new, pressing question: what are the best ways for startups to manage excess cash in the US? In today's environment, leaving millions uninsured in a single checking account is not a viable option, yet letting it sit idle feels like a major missed opportunity. That idle cash has significant earning potential. A potential yield of 4-5% can translate into extra operational runway that could fund a key hire or extend your product development timeline.

For US companies, a disciplined approach to treasury management is not a complex distraction. It is a core operational function that signals financial maturity to your board and future investors. This guide provides a pragmatic playbook for founders and operators at pre-seed to Series B startups to protect capital, maintain liquidity, and make every dollar work harder.

Foundational Step 0: Calculate Your Operating Buffer

Before you can think about investing excess cash, you must answer the most critical question: How much cash do you need to keep completely liquid for day-to-day operations? This is your Operating Buffer. Calculating it correctly requires focusing on your gross burn, not your net burn. Gross burn is the total of all your monthly cash expenses, like payroll, rent, and software subscriptions, which you can pull directly from a report in your accounting software like QuickBooks.

Your net burn, which is revenue minus expenses, can be misleading for this purpose, especially if you have volatile or unpredictable revenue streams. Your gross burn represents your true cash outflow and is the safest number to use for planning. Your Operating Buffer is the amount of cash held in your primary checking account to cover these expenses without fail. A common formula is 3 to 6 months of gross monthly burn. This is your non-negotiable liquidity.

Consider a SaaS startup with a gross monthly burn of $200,000.

• Gross Monthly Burn: $200,000 (salaries, cloud services, marketing)
• Buffer Period: 4 months (a conservative choice)
• Operating Buffer: 4 x $200,000 = $800,000

This $800,000 must remain in a highly liquid, accessible bank account. Any cash above this amount can be considered for higher-yield strategies. This simple calculation allows you to segment your cash into three distinct tiers, each with a different purpose and risk profile.

• Tier 1 (Operating Cash): Your 3-6 month Operating Buffer. It stays in your primary bank account for immediate needs.
• Tier 2 (Near-Term Reserves): Cash you do not need for the next 6-18 months but will likely use for planned growth, such as team expansion or a large marketing campaign.
• Tier 3 (Long-Term Reserves): Funds you will not need for at least 18 months. This represents your strategic, long-term runway.

Step 1: The Startup Treasury Menu: Where to Park Your Cash

Once you have ring-fenced your Operating Buffer, you can explore treasury solutions for early-stage companies to manage your Tier 2 and Tier 3 reserves. The primary goals are capital preservation, liquidity, and then yield, in that order. For US-based startups, the menu generally consists of three safe, high-yield options that are among the best short-term investments for startups.

1. High-Yield Savings and Automated Sweep Accounts

These are often the best first step for managing idle cash in startups. The standard FDIC insurance limit is $250,000 per depositor, per insured bank, for each account ownership category (FDIC). This creates a significant concentration risk for a funded startup with millions in a single account. Startup cash sweep accounts solve this problem elegantly. They work by automatically distributing, or "sweeping," your deposits across a network of partner banks.

This means automated sweep account networks can offer expanded FDIC coverage, sometimes up to $5 million or more, by spreading your funds across multiple institutions. You still see and manage your cash in a single dashboard, but behind the scenes, your risk is diversified. In practice, we see that this is the most common first step for founders looking to mitigate concentration risk while earning a competitive yield. This option is ideal for holding excess Tier 1 cash and all of your Tier 2 reserves.

2. Money Market Funds (MMFs)

Money market funds are a type of mutual fund that invests in high-quality, short-term debt instruments like government securities or commercial paper. They are not FDIC insured, which is a critical distinction. Instead, they are typically held in a brokerage account. For this reason, SIPC protects securities customers of its members up to $500,000 (including $250,000 for claims for cash) against brokerage failure (SIPC). It is crucial to understand that SIPC protects against brokerage failure, not against market losses in the fund's value.

However, Government Money Market Funds, which invest exclusively in U.S. government securities and repurchase agreements, are considered extremely low-risk. They often offer slightly higher yields than high-yield savings accounts and provide next-day liquidity (T+1), meaning you can typically access your cash the business day after you sell. This makes them a strong candidate for Tier 2 and Tier 3 reserves.

3. U.S. Treasury Bills (T-bills)

T-bills are short-term debt obligations backed by the full faith and credit of the U.S. government, making them one of the safest investments in the world. U.S. Treasury Bills are issued with maturities of 4, 8, 13, 17, 26, or 52 weeks (U.S. Treasury). The yield is fixed at the time of purchase, providing predictable returns.

This variety of maturities makes T-bills ideal for a strategy called “laddering.” A T-bill ladder involves purchasing bills with staggered maturity dates. For example, you could invest a portion of your Tier 3 cash into 13-week, 26-week, and 52-week T-bills. As the 13-week bills mature, you gain liquidity and can decide whether to reinvest or use the cash. This creates a predictable liquidity schedule for your long-term reserves and is an excellent strategy for protecting your core runway in Tier 3.

Step 2: Making It Happen: An Operational Playbook for Managing Excess Cash

Navigating the operational setup without a dedicated finance team can feel daunting. The key is to establish a simple but formal process to avoid making ad-hoc, reactive decisions with company capital. The reality for most pre-seed to Series B startups is more pragmatic: start simple and build discipline over time. This approach provides a solid foundation for more complex liquidity strategies for founders as the company scales.

Draft a Simple Startup Treasury Policy

Your first move should be creating a one-page Startup Treasury Policy. This is a simple document, approved by your board, that codifies your strategy and serves as your north star for all cash management decisions. It should outline:

• Objectives: State clearly that the primary goals are capital preservation and liquidity, with yield as a tertiary objective. This sets the right risk-averse tone.
• Approved Instruments: List the specific vehicles you are authorized to use. For example, “FDIC-insured sweep accounts, Government Money Market Funds, and U.S. Treasury Bills with maturities under 52 weeks.” This prevents speculative investments.
• Concentration Limits: Define how much cash can be allocated to any single instrument or financial provider. For example, you might cap exposure to any single money market fund at $5 million.
• Approval Authority: Specify who (e.g., CEO, Head of Operations) can authorize treasury transactions and under what thresholds. This establishes clear accountability.

This policy is your defense against taking on unintended risk and provides clear guidance for anyone managing company cash.

Choose the Right Treasury Platform

The market for treasury solutions has two main paths. All-in-one platforms offered by modern fintech banks often provide integrated business banking, automated sweep accounts, and investment tools in a single interface. This is often ideal for operational ease and is a great starting point for lean teams.

Alternatively, traditional brokerages offer direct access to a wider range of instruments like individual T-bills and a broader selection of MMFs. This route provides more granular control but typically requires more hands-on management. For most early-stage companies, an all-in-one platform or a high-yield sweep account connected to your main operating bank is the most efficient starting point for managing idle cash in startups.

A Practical Plan for Optimizing Startup Cash Reserves

Optimizing startup cash reserves is not about becoming a financial markets expert. It is about implementing a disciplined system that aligns with your company's risk tolerance and operational reality. The goal is incremental optimization, not a complete financial transformation. Getting started is simpler than it seems.

Here are four actionable steps you can take this week:

1. Calculate Your Operating Buffer: Open QuickBooks, determine your average gross burn over the last three months, and calculate your 3-6 month buffer. This is your baseline for all other decisions.
2. Tier Your Remaining Cash: Formally segment the cash above your buffer into Near-Term (6-18 months) and Long-Term (18+ months) reserves in a simple spreadsheet. This clarifies how much capital you have to work with for higher-yield strategies.
3. Implement an 80/20 Solution: Open a high-yield, expanded-FDIC sweep account. Moving your excess operating cash and near-term reserves here is often the single most impactful first step.
4. Draft a Simple Treasury Policy: Write a one-page policy outlining your objectives and approved instruments. Getting this formally approved by your board establishes crucial financial governance and discipline.

Consider a deeptech startup that just raised a $12M Series A. Their gross burn is $300,000 per month.

• Tier 1 (Operating): They establish a conservative 6-month buffer of $1.8M. This stays in their primary checking account, with an automated sweep for balances over the $250,000 FDIC limit to maximize insurance coverage.
• Tier 2 (Near-Term Reserves): They allocate $5M for a major R&D push planned in 9-12 months. This is placed in a Government Money Market Fund for safety, a potentially higher yield, and T+1 liquidity.
• Tier 3 (Long-Term Reserves): The remaining $5.2M is placed in a T-bill ladder with 13, 26, and 52-week maturities, providing maximum safety and predictable returns for their long-term runway.

This structured approach turns a daunting task into a manageable process, ensuring your startup's most critical asset is both safe and productive. See the Cash Management & Burn Rate hub for related guides and tools.

Frequently Asked Questions

Q: How often should we review our treasury strategy?
A: A good cadence is quarterly, aligned with board meetings. Review your cash forecasts, burn rate, and investment performance. A major event like a new funding round or a significant change in business model should also trigger an immediate review of your strategy for managing excess cash.

Q: Can't we just open multiple bank accounts for more FDIC coverage?
A: While technically possible, this is operationally complex and inefficient. Managing multiple accounts, logins, and statements creates administrative overhead and increases the risk of error. An automated sweep account provides the same benefit through a single, streamlined platform, making it one of the best ways for startups to manage cash.

Q: What are the main risks of doing nothing with excess cash?
A: The two primary risks are concentration risk and opportunity cost. Leaving millions in a single account exposes you to loss beyond the $250,000 FDIC limit in the event of a bank failure. Additionally, idle cash loses purchasing power to inflation and misses out on low-risk yield that could extend your runway.

Q: Are T-bills completely risk-free?
A: T-bills are considered to have virtually no credit risk because they are backed by the U.S. government. The main risk is interest rate risk, which only applies if you need to sell the T-bill before its maturity date. If interest rates have risen, your older, lower-yield bill will be worth less on the secondary market.