How Much Cash Should Your Startup Keep in Reserve?

Founders obsess over how much they are raising and spend far less time on how much they should keep untouched. Yet the size of your reserve is what decides whether a bad quarter is a scare or an extinction event. Here is a simple way to think about it.

Start from net burn, not the bank balance

Your reserve should be measured in months of survival, not a round number of rupees. That means anchoring on net burn: the rate your cash actually depletes after revenue. A ₹1 Cr balance means very different things at ₹10L versus ₹40L of monthly net burn.

Set aside what is already committed

Not all cash in your account is spendable. Some of it is already owed. Before you count your true buffer, ring-fence:

• •Taxes you will owe (GST payable, TDS, advance tax).
• •Payroll and statutory dues for the current cycle.
• •Vendor payments and any short-term liabilities already incurred.

This is the difference between profit and cash: you can look fine on the P&L and still be short once committed outflows land. We wrote about exactly this trap in cash flow vs profit.

The India nuance: locked cash cuts both ways

In India, GST input credit and TDS receivable are real money that sits outside your bank until recovered. Count them toward your effective position when you plan, but do not rely on them to pay next week’s salaries, since the timing is not yours to control.

Watch the buffer live

A reserve rule only works if you know your number today, not at quarter-end. Runway computes your true, tax-aware runway from live bank and payment data and warns you before you cross your buffer, so the reserve is a tripwire, not a postmortem.