How much cash reserve should a PR agency hold?

Key takeaways

• Aim for 3-6 months of operating costs in your cash reserve. This is your working capital buffer to cover rent, salaries, and software if income stops.
• Your emergency savings target depends on your client mix. Agencies with a few big retainers need more buffer than those with many smaller, diverse clients.
• Calculate your cash flow runway monthly. Know exactly how many months you can survive on your current bank balance if all new work dried up.
• Build your reserve gradually. Start by setting aside a fixed percentage of monthly profit, like 10-20%, until you hit your target.
• Separate your reserve from your main account. Keep it in a separate, easy-access savings account so you're not tempted to spend it.

What is a PR agency cash reserve strategy?

A PR agency cash reserve strategy is your plan for how much spare money to keep in the bank. Think of it as a financial airbag. It's there to protect your business if you hit a sudden bump, like a key client leaving or a big invoice being paid late.

For a PR agency, this isn't just a nice-to-have. Your income often comes from monthly retainers. If one of those stops, you need cash to pay your team while you find a replacement. A good strategy tells you exactly how much to save, where to keep it, and when to use it.

It turns panic into a plan. Instead of worrying "can we make payroll?", you know you have a buffer. This lets you make smarter decisions, like saying no to bad clients or investing in new business development, without fear.

Why is a cash reserve so critical for PR agencies?

PR agencies face unique cash flow risks that make a reserve essential. Your business model is built on people and relationships, both of which can change quickly. A reserve gives you stability when those changes happen.

The biggest risk is client concentration. Many PR agencies rely on a handful of big retainer clients. Losing just one can wipe out a huge chunk of monthly income overnight. Your working capital buffer pays the bills while you fill that gap.

Another risk is the payment cycle. You do the work, invoice the client, and then wait 30, 60, or even 90 days to get paid. Your team needs paying every month, regardless. Your cash reserve smooths out these timing mismatches.

Finally, PR is reputation-based. A crisis for a client can sometimes become a crisis for you. Having funds set aside means you can manage the situation properly, without making desperate financial decisions that hurt your agency's long-term health.

How much cash reserve should a PR agency actually hold?

Most PR agencies should aim to hold between 3 and 6 months of their operating expenses in cash. This is your core emergency savings target. To find your number, add up all your essential monthly costs: salaries, rent, software subscriptions, and utilities.

Let's say your agency's monthly running cost is £20,000. A 3-month reserve would be £60,000. A 6-month reserve would be £120,000. That money sits in the bank, untouched, for a true emergency.

The exact amount within that 3-6 month range depends on your agency's profile. If you have a few large retainer clients, aim for the higher end (5-6 months). Your risk is more concentrated. If you have many smaller, project-based clients, you might be safe with 3-4 months, as income is more spread out.

This isn't guesswork. It's a calculated part of your PR agency cash reserve strategy. Specialist accountants for PR agencies can help you model different scenarios to find your perfect number.

How do you calculate your specific cash flow runway?

Your cash flow runway is how many months you can keep operating if you stopped bringing in new money today. It's a simple but powerful number to track. You calculate it by dividing your current cash reserve by your average monthly cash burn rate.

First, find your monthly burn rate. Look at your bank statements. How much money goes out each month for absolutely essential costs? Ignore one-off purchases. Let's say it's £18,000.

Next, check your actual bank balance. Let's say you have £90,000 in your business account. Your runway is £90,000 / £18,000 = 5 months. This is a healthy position. If your runway drops below 3 months, it's a red flag that you need to focus on building cash.

Update this calculation every month. It's one of the most important cash flow runway tips we give agency owners. It turns an abstract worry into a concrete metric you can manage. To get a full picture of your agency's financial health across cash flow and profitability, try our free Agency Profit Score — it takes just 5 minutes and gives you a personalised report.

What counts as a "true emergency" for using the reserve?

A true emergency is an unexpected event that threatens your agency's ability to operate. It's not for planned expenses, like a new hire or office refurbishment. Using the reserve for the wrong reasons defeats its purpose.

Good reasons to use your PR agency cash reserve include: the sudden loss of a major client that you couldn't foresee, a global event that pauses multiple client campaigns, or a critical piece of equipment failing that you need to replace immediately to serve clients.

Bad reasons include: covering for consistently late client payments (fix your invoicing process instead), funding a marketing campaign (that should be a planned investment), or propping up a loss-making client project (renegotiate the scope or price).

The rule is simple. Use it only for survival, not for growth. Once you dip into it, your first financial priority becomes building it back up to its target level. This discipline is what makes the strategy work.

Where should a PR agency keep its cash reserves?

Keep your cash reserve in a separate, easy-access business savings account. Do not mix it with your day-to-day operating account. The separation is psychological and practical. It stops you from accidentally spending it, and it lets you see exactly how much safety net you have.

The account should be low-risk and liquid. This means you can get the money out quickly, usually within a day or two, without penalties. Don't lock it away in long-term investments or stocks. Its job is to be safe and available, not to generate high returns.

You might earn a small amount of interest, which is a bonus. But the primary goal is security, not investment growth. Some high-street banks and digital banks offer easy-access business savings pots that are perfect for this purpose.

Having it separate also makes your financial reporting clearer. You can instantly see your operational cash versus your safety net. This clarity is a key outcome of a professional PR agency cash reserve strategy.

How can a PR agency build up its reserves from scratch?

Building a reserve feels daunting, but you do it slowly and consistently. The most effective method is to treat it as a non-negotiable monthly expense. Every month, automatically transfer a percentage of your profit into your separate reserve account.

Start with what you can. Even transferring 5% of your monthly net profit is a start. As you get more comfortable, increase it to 10%, then 20%. The goal is to make it a habit, like paying tax. Before you know it, the balance will grow.

Another tactic is to allocate windfalls. If you land a big project or get an unexpected rebate, put a chunk of that straight into the reserve. Don't let "extra" money burn a hole in your pocket. Use it to build your long-term stability.

This process is part of managing your working capital buffer. It requires discipline, but the peace of mind is worth far more than the short-term spending you give up. It's the foundation of a financially mature agency.

What are the warning signs that your cash reserve is too low?

Several clear signs indicate your cash reserve is insufficient. The most obvious is stress about making payroll every month. If you're constantly checking the bank to see if client payments have landed in time to pay your team, your buffer is too thin.

Another sign is turning down opportunities because of cash flow, not capability. For example, you might need to hire a freelancer for a new project but can't afford to pay them before the client pays you. A healthy reserve lets you say "yes" to good work.

You're also too low if a single late payment from a client would cause a crisis. If your business can't withstand a 30-day delay on one invoice, you have no margin for error. This is a risky way to operate a people-based business like a PR agency.

Regularly calculating your cash flow runway will show you these warning signs in hard numbers. If your runway is consistently under 3 months, it's time to prioritise building your emergency savings target above all else.

How does client mix affect your reserve strategy?

Your client mix directly determines how much cash reserve you need. Agencies with a concentrated client base need a much larger buffer than those with a diversified one. It's all about managing risk.

If 40% of your revenue comes from one retainer client, losing them is a massive blow. You might need a 6-month reserve to give yourself enough time to replace that income without damaging the business. The insights from other agency models show how diversification reduces this risk.

If your revenue is spread across 10 smaller project-based clients, losing one is a 10% hit. That's easier to manage quickly. A 3-4 month reserve might be sufficient here, as your income stream is more stable and predictable.

Review your client list every quarter. Ask yourself, "What would happen if our top two clients left next month?" Your answer will tell you if your current PR agency cash reserve strategy is adequate for your specific risk profile.

Can a strong cash reserve become a competitive advantage?

Absolutely. A strong cash reserve is a huge competitive advantage for a PR agency. It changes how you operate and the decisions you make. You move from a position of fear to a position of strength.

With a good reserve, you can be more selective with clients. You don't have to accept every piece of work, especially from difficult clients who pay late. You can choose projects that align with your agency's goals and values.

It allows you to invest in your business. You can fund a new business development role, upgrade your media database, or send your team on training without waiting for a specific client to pay for it. This fuels long-term growth.

It also makes you more resilient in pitches. When a prospect asks about your stability, you can confidently explain your financial safeguards. This can be the difference between winning and losing a major retainer. Your financial health becomes a selling point.

What's the first step to creating your cash reserve plan?

The first step is simple: calculate your monthly operating burn rate. Open your accounting software or bank statements. Add up all the essential costs you must pay every month to keep the doors open and the team employed.

Once you have that number, multiply it by 3. That's your initial minimum emergency savings target. Write this number down and open a separate business savings account if you don't have one already. Name it "Cash Reserve".

Next, set up a monthly standing order to transfer money into it. Start with whatever you can afford, even if it's just £500. The act of starting is more important than the amount. Consistency builds the habit and the balance.

Finally, put a reminder in your calendar to review this in 3 months. Check your progress and adjust your monthly transfer if you can. Building a PR agency cash reserve strategy is a marathon, not a sprint. Want to see how your cash reserves and overall financial health compare? Take our Agency Profit Score to get a clear picture across Profit Visibility, Cash Flow, and more.