Bank Accounts & Management

Bank accounts

Operating accounts

• Maintain two operating accounts at two different institutions*:
• One account should be designated primary for day-to-day activities - where you sync up your finance systems like payroll, bill pay, subscription collection for incoming cash receipts, etc.
• The other one is backup for emergency situations.
*Certain FinTech platforms are not banks themselves. It’s critical to select platforms that partner with FDIC-insured banks, this is where your deposits ultimately sit.

• Do not keep excess cash in your operating accounts.

• Select operating account partners based on your business needs - for example, do you need foreign currency exchange, run ACH at scale, a line of credit? Make sure the selected banks / platforms can serve your business needs effectively.

• Companies might seek relationships with banks which do not typically engage with early-stage startups after receiving external financing.

Daily sweep accounts

• Set up a sweep money market account:
• Money market accounts come in a variety of structures:
• Those with nightly sweep features across a network of other banks will provide higher FDIC insurance coverage than the standard $250,000 per bank per depositor limit.
• Those that stay on the bank’s balance sheet count towards the same $250,000 FDIC insurance limit in combination with your checking account.
• Examples:

ㅤ	“On Balance Sheet” Money Market	FDIC Insurance Coverage	“Sweep Account” (with four 3rd-party banks, for example)	FDIC Insurance Coverage
Checking	$500,000	ㅤ	$500,000	$250,000
Money Market	$1,500,000	ㅤ	$1,500,000	$1,000,000 ($250,000 x 4)
Total	$2,000,000	$250,000	$2,000,000	$1,250,000

• If you’re setting up multiple sweep accounts with different institutions, pay attention to the network of banks they use. FDIC insurance limit applies to per bank per depositor (identified by the same EIN).

• Recommendation is to keep 3-6 months of liquidity needs among operating and sweep accounts.

• If you have material excess cash (for example, >$10M outside of operating and sweep accounts), open a managed securities account (see below).

Professionally managed securities account

• Appoint an asset management team (or corporate cash management) to manage a portfolio of very short-term, highly liquid, US government securities. These types of accounts require a management fee. Like a brokerage account, the securities are held at a custodian (a third-party institution in your company’s name), not the bank’s name.

• The Board of Directors needs to approve a treasury mandate under which the funds are managed.

• Focus the policy on capital preservation and liquidity - not higher yields (which will be more risky and can jeopardize the business).

Bank account management practices at OCV Companies

• Each OCV company will maintain two bank accounts:
• One Primary Operating Bank Account (Checking with Cash Sweep election - up to $125M FDIC insurance limit). This eliminates the need of frequent wire transfers between accounts, multiple syncs to different finance systems, and reduces internal control risks.
• One secondary “emergency funds” account (up to $250,000 balance) through the company’s Corporate Card Provider.
• Note: A list of partner banks for the Corporate Card Provider needs to be provided to the primary operating bank so they can exclude these financial institutions from the Cash Sweep pool to maximize insurance coverage.

• Have more than one signatory on file for all bank accounts / financial institutions.
• In case where one person is not available, others can act/sign on behalf of the company.
• Prior to external funding: OCV supports bank account management including primary account holder responsibilities in addition to Company executives.
• See [here] for standard set of access levels.
• Post external funding: signatories will be updated to Company executives only. Make sure there are multiple signatories for each account and set up approval rights appropriately.

• Wire approvals and controls:
• All wire transfers out must require at least one level of approval by a Company or OCV representative. Ideally, the Accounting Team should initiate the wire transfer and management approves.
• Consider setting up two approvers for wire amounts above a certain limit.