# What is Payout reserve?

> A payout reserve is cash a prop firm sets aside to cover expected and worst-case performance rewards, so it can keep paying traders through a bad month.

- Source: https://pipvalley.com/glossary/payout-reserve
- Publisher: PipValley - web design studio for prop trading firms
- Updated: 2026-10-03

In a prop firm, revenue arrives up front as fees while payouts arrive later and unevenly. A payout reserve holds part of that revenue back to cover the liability building up in simulated funded accounts, rather than spending it on marketing or operations.

Sizing a reserve starts with current open liability: profit sitting in simulated funded accounts that could be requested this cycle. Firms add a margin for a strong market month, correlated traders, and delays in payment processor settlements and rolling reserves.

Firms that collapsed or paused payouts in past years generally had a liability problem before they had a public problem.

## Why it matters

No website can make up for missed payouts. A reserve policy is what lets you say, and mean, that payouts are processed on schedule. It also gives you an honest answer when traders and partners ask how the firm is funded. Review it every month against your actual payout ratio.