Cash Management for Small Businesses

Small businesses live and die by their cash management practices.

I’ve run my own business since 2012 and seen the inside of +100 small businesses. Time and time again I see it and feel it … you gotta be smart with $ or else you’ll run yourself into the ground.

As my good friend Brian Lofrumento says, most businesses fail not because people give up but because they run out of money.

Running out of money is a preventable problem.

Smart cash management is the solution.



I first wrote about intentional cash management in Get a Grip on Your Time and Money (Podcast Bonuses). Since then I’ve learned a few more tricks.

Remember my Money Tripper approach to cash management?

Version 1.0 – First list expenses/outflows in priority order, then track money as it comes in … my fancy spreadsheet would show how deep down the list of expenses you actually had cash on hand to cover. The approach forces prioritization of expenses and reveals how much (or how little) of those can be afforded in the present moment. A huge cash management hangup for a lot of businesses is spending money that’s not yet in hand. “Oh, we can pay for this once Project X comes in, and then after Dave pays us, we’ll be in a real good spot.” Then Project X doesn’t come in, and Dave goes out of business and you never collect. So your money is already spent, but the $ you planned to receive to cover it never came in. #Hosed.

Version 2.0 – Same concept, but a fixed % of every dollar of revenue that came in was stripped away and dedicated to saving up for taxes and saving up to make a donation to my church. So whenever I got $100, instead thinking the business had $100 to spend, my Money Tripper 2.0 took out a percentage for taxes and tithing, leaving more like $75 for the business to apply toward expected expenses.

Version 3.0 – What I’m sharing today.

Introducing … Profit First.

The Profit First approach to cash management for small business:


I’m so glad friends in YNAB Fans said something about entrepreneur and author Mike Michalowicz so that I could find Mike’s Profit First cash management method and the YNAB for Small Business group.


Cash Management for small business - the Profit First approach

Go ahead and get a copy of Mike’s book and lean on this summary:

(FYI there are add-on variations for contractors, e-commerce, micro gyms, dentists and tradies.)


[1] We are taught that profit comes LAST.

revenue – expenses = profit

First, you make money.

Then, you cover expenses.

And what’s left?

… that’s profit.

Our inherited/default psychology runs our businesses in this order.

[2] Things expand to the space allotted to them: Parkinson’s Law.

Small business owners make decisions on the fly.

We open our banking apps, look at $ in the bank or available credit on a card, and decide ON THAT whether to make a purchase.

We see it … we spend it.

[3] Expenses expand to all visible dollars, consuming 100% of revenue. There is no profit. 💸


Put [1] and [2] together and this is the outcome.

Cash management that sucks.

What if we flipped the profit order and used Parkinson’s Law to our advantage?

You can, and it will RADICALLY improve your cash management to keep expenses in check, grow your business and produce profits you actually realize and enjoy.

Enter … PROFIT FIRST.

[1 revised] Profit comes FIRST.

revenue – profit = expenses

First, you make money.

Then, you set some aside for profit.

And what’s left?

… that’s money available for expenses.

[2 revised] Things still expand to the space allotted to them, but we draw boundaries to how far they can go.


The crux of the Profit First method is to open at least 5 separate bank accounts (more later on why you might do more than 5):

  1. Income
  2. Profit
  3. Owner’s Comp (OComp)
  4. Taxes
  5. Operating Expenses (OPEX)

Deposit all revenue into Income: deposit checks there, have Stripe and Square deposit funds there, etc.

Once or twice a month, EMPTY the Income account into the other accounts.

How much will you put in each account? Chapter 4 lays out a process for determining that. The amounts will change each time as they are not fixed $ amounts, but percentages. Each of the 4 accounts (#2-5) have their own Target Allocation Percentage (TAP).

Every business is different, and Chapter 4 has an exercise to help you land on your TAPs.

The book has this table of benchmark TAPs by Real Revenue Range.

Cash Management for Small Business - Target Allocation Percentage benchmark from the book Profit First

[3 revised] Expenses expand to just visible dollars in OPEX, a smaller % of revenue. There IS profit.


Yes, this is like the Envelope Budgeting Approach applied to small business.

If you are running a business that doesn’t have a full-time bookkeeper, accountant and controller who can fill you in daily, then you need a cash management approach like this.



The best banks for Profit First

OK, so now that you’re onboard with this small business cash management approach … how on earth do you implement it??

If you are running a microbusiness, chances are GREAT that traditional big banks (Chase, Wells Fargo, US Bank, BoA) are not going to work for you. They have significant account minimums that would tie up precious working capital or monthly fees that eat away at your profit.

So what do you do?

Here are my favorite banks for small businesses that also make it easy to follow the cash management practices of Profit First:

[1] Brex

zomg. Love Brex.

Based in my home state of Utah.

Super clean interface.

Free ACH transfers – makes it mad easy to pay vendors.

No minimums.

No standing monthly fees.

FREE to open up to SEVEN accounts under one business … perfect for Profit First!

Each account has its own account number, so you can send and receive directly into these accounts if needed.

MAD easy to add as many cards as you need to give to contractors, employees, while also limiting their spending limits.

Can create virtual “vendor cards” in 5 seconds online. If that one card gets compromised, you can shut it down without having to reset card info for alllll your other vendors.

For US businesses only.

Use my link and get $250 after signing up.


[2] Novo

Novo is also part of the wave of new, online-first banks.

Also a very clean app, great features, and the option to create “Reserves” (up to 5 per account) for following the Profit First method.

Includes a tool to send and process invoices for free!

Bank with Novo


[3] Small Business Bank

“YOUR HOMETOWN BANK. WHEREVER YOU LIVE.”

I’ve been with SBB since 2013!

While Brex and Novo are more like startups with designers and developers making a slicker banking experience, SBB are first and foremost small business bankers. So their website and app are a bit clunky, but when you need to interact with a person who knows what’s up and is ready to offer premium service, they CANNOT be beat!

Similar to Novo and Brex, SBB has no minimums and no regular fees.

Service is and always has been amazing.

They allow up to four accounts (two checking, two savings) per business … and you can register more than one business under your individual log in. (Brex and Novo allow just one business per log in, so if you have multiple entities, you’d use a different email/login for each entity.)

www.smallbusinessbank.com




“You said earlier ‘at least’ 5 accounts … why?”

Thanks for the reminder.

If you run a product sales or resource-heavy business … it would also be smart to open (at least) two more accounts “on top” of the 5 noted above.

These would be:

  1. Gross Revenue
  2. Cost of Goods/Services Sold (COGS/COS)
  3. Income, aka Real Revenue
  4. Profit
  5. OComp
  6. Tax
  7. OPEX

COGS/COS would be … the price of inventory you buy to sell. The cost of raw materials used to make a product to sell. The cost of a temporary subcontractor to fulfill a project.

Managing your money this way will ensure you always have working capital.


Remember, there are industry-specific suggestions for additional accounts and Profit First adaptions in these these extension books. Profit First, for …

Regardless of what industry you’re in …

Starting TODAY, strive to have 3 months of working capital on hand. Then shoot for 6 months. Setting and accomplishing that goal will require significant changes to how you’ve been managing cash up to this point.


Adding Gross Revenue + COGS accounts also makes it SUPER easy to calculate gross profit margin (GPM), while the rest of the system makes it easier to calculate net profit margin (NPM). What’s the difference?

Business Success Rules of Thumb: 50% GPM and 10% NPM (see page 53).

In simple English this means:

  • If you sell something, you better sell it for DOUBLE what it cost you to make it (50%). You will spend at least 40% of the rest of what you brought in paying yourself, your staff, taxes, accounting, marketing, rent, etc.
  • If, after paying for ALL expenses (including your wages if you work in the business), your business doesn’t have at least 10 cents left over from every dollar brought in (10%), you might as well give up the business and work for someone else. The risk, in this case, is not worth the reward (profit). You’ll be better off putting your effort and money into another investment with prospects of better returns, or possibly running your work thru a nonprofit corporation with a public-serving mission instead.

While we’re on it … Mike’s advice is, “When in doubt, open an account!”


There is no end to the number of accounts you can open that will help improve your cash management strategy by clearly tucking $ away for specific purposes.



Was this helpful?

Let me know which new cash management habit you’ll adopt first.


Comment below, and definitely drop a link to your business so we can check it out and celebrate your success.

To your success … and profits 💰

By |2022-01-03T11:14:54-07:00November 22nd, 2021|Marketing|0 Comments

How to Make Stuff Happen

Everyone’s got dreams: things that have never been done or that are bigger than what can be done alone. A few notes to make stuff happen:

[1] Be up to something.

Be up to this thing until you have momentum. Momentum is the flywheel of force that makes it easier as time goes on for you to continue contributing to this thing you are up to. Momentum consists of habit and ritual you’ve created which draw you back into taking actions for the same thing. Progress is an evidence of momentum. Being up to something means you have something at stake. You are living for something.

Make Stuff Happen - start by pounding the rock
How to Make Stuff Happen: start by pounding the rock for your own cathedral

[2] Test for traction.

Once you have momentum, share what you are up to with another human being. Traction is momentum that attracts. When people are really up to something, it’s attractive. People will ask questions, dive in, ask for more, make offers in the presence of what’s attractive. If they want more of it, you’ve got traction.

[3] Invite.

Invitations without a background of people getting what you are up to leaves them unable to answer for themselves … “what’s in it for them to be asking me?” People are suspicious. Aren’t you? Invitations made in advance of experiencing momentum, with an absence of attraction, fall flat. People have their own stuff they are up to. Why would they create lifeless busy work for themselves? After people witness you being up to something and experiencing the momentum of it, only then does an invitation to participate stand of shot of landing.

[4] Stay the course.

Regardless of response to invitations, keep going. Making things happen requires not being messed with by responses.

Make Stuff Happen - stay the course
Stay the course.

Other considerations to make stuff happen:

Why invite someone to do something you aren’t up to? If you won’t do it, if you aren’t doing it … why would they?

Often a prerequisite to [2] is Make a connection. Connect with another human being so they can paint a picture of what’s going on in their world; something to which you can relate. Give them a chance to say what they are up to. You may find they are up to nothing. Start with a no-stake, no-demand, no-request contact. When they experience that you are willing to look into their world, they then may be willing to hear you offer something from yours.

By |2021-12-27T13:27:49-07:00October 17th, 2021|Faith, General Life, Marketing|0 Comments

Pound The Rock

Pound the rock.

It’s in the footer of my website.

It’s in my email signature.

It’s the first phrase of three I have littered all over the internet. (The second and third being “Do good” and “Have a great time.”)

It’s the motto Gregg Popovich uses at the San Antonio Spurs. Their fan club is named after it. In fact, I’ve been told, it’s the only quote/motto/words-of-inspiration that appear anywhere inside the Spurs’ facilities.

So what about it? Why pound the rock?

This:

When nothing seems to help, I go and look at a stonecutter hammering away at his rock perhaps a hundred times without as much as a crack showing in it. Yet at the hundred and first blow it will split in two, and I know it was not that blow that did it, but all that had gone before. — Jacob Riis

Pound The Rock - Jacob Riis

We love telling “overnight success” stories.

They aren’t true.

Every “overnight success” story is … just a good story.

A story designed to get us to believe “we too” can be as successful as the “overnight” success.

Well, we can.

But not overnight.

Because they didn’t get there overnight.

These stories, so it seems to me, often are told to sell “the overnight method.”

When we buy that method, we get burned. Expectations fall unfulfilled, and we don’t succeed overnight — because we need to pound the rock:

To pound out our weakness,

To pound in our dedication,

To pound out non-essentials,

To pound in our focus,

To pound out dead weight,

To pound in muscle memory.

The true backstory of every success (“overnight” or not) is years of trial and error . . .

. . . effort on effort, and upset and defeat followed by persistence and consistency … all of which finally yield a win.

I’ve long said the most important attribute for any marketing campaign is consistency. You can blog once a day or once a year. If you stick to your schedule, people will accomodate whatever pattern you establish … if you stick to it. What doesn’t work is rush then stop. Publish then quit. Launch then disappear, only to relaunch with flare and pizzaz in 6 months quickly followed by flame-out, just as before.

And see that all these things are done in wisdom and order; for it is not requisite that a man should run faster than he has strength. And again, it is expedient that he should be diligent, that thereby he might win the prize; therefore, all things must be done in order (Mos 4:27).

This isn’t bad news.

Success isn’t in one-trick ponies or luck-of-the-draw rewards.

Success is in being adept at producing desirable results again and again, at will.

Success is in knowing “the wisdom and the order” of how things work, the present limits of your strength (your lactate threshold, for example).

Yes, part of success is arriving at the destination, a destination — of finishing or winning a race.

But grander elements of success are:

falling in love with getting there

knowing you can get there when you decide you want to

knowing what it takes to get there, how to command the elements and the circumstances to combine and align in getting you there

in other words, knowing how to get there again, on command … without assigning any piece of arrival to luck or chance

experiencing your personal capacity to do work every day, to conquer in the face of resistance, and to survive or even thrive in the face of calamity.

“Pound the rock” is a motto to succeed every day.

Between each sunrise and sunset, put.in.the.work.

99 of 100 blows of the hammer end with the rock uncracked.

In a darker moment, the uncracked rock may seem to laugh or scorn.

“What are you doing? Does your work even count? You’re not strong enough. You have the wrong tools. You can’t do this. You’re not making a difference at all. What a waste. Now this, what you’re doing, this is insanity!! You keep swinging, expecting me to crack. I’ll never crack. The outcome is the same. And always will be. Move on … move on to easier ground.”

It’s tricky.

Insanity is doing the same thing over and over, seeing no results, and expecting a different outcome.

Yet that definition is insufficient.

There are some tasks that are … a pound-the-rock scenario. A scenario where it just does take 99 repeated blows of no-difference-at-all results, which, when followed by the 100th WHAM! everything changes.

It may seem just one blow counted. One blow must have been different from the others. But no … all 99 changed the structure, strength and integrity of the rock until on the 100th it cracked. All 99 up to that point took mental grit and steadfastness and belief that the work was worth it.

I’m not a “good” runner.

I’m not “gifted” or a “natural.”

I don’t have lean thighs.

My VO2 max, when I’m not fully trained, is super average.

My calves are huge, the extra weight doesn’t help.

My calves also don’t connect high on my leg, so their biomechanical leverage is . . . average.

My knees rotate out and my tibia & fibula bow in to compensate, so some force from every step gets wasted in non-vertical, non-forward vectors.

My early years of swimming made my ankles super flexible, and early years of gymnastics trained them to act like absorbers; but great runners have stiffer ankles, trained to act like springs.

Yet my half marathon times keep coming down:

1:42:09 (7:47/mi) — 2008

1:40:26 (7:40/mi) — 2014

1:28:27 (6:45/mi) — 2015

1:24:35 (6:27/mi) — 2017

Why is that?

Because I pound the rock.

There’s nothing special about me.

Sure, I’m learning better form. As I pound the rock.

Sure, I’m in overall better shape … because I pound the rock.

Sure, I’m more flexible and less prone to injury … because I pound the rock (and rollll out, thanks TriggerPoint!).

Sure, I have better run gear and better workout routines … because I pound the rock.

I just pound the rock.

And anyone can pound the rock.

This much about life seems so simple and clear: when you work hard under the direction of people who understand the mechanics of how things work, you get results.

That’s why I put “Pound the rock” everywhere.

To remind myself of, and to stand for, the ethic of putting in the work.

“In the sweat of thy face shalt thou eat bread, till thou return unto the ground” (Gen 3:19).

“Whatsoever a man soweth, that shall he also reap” (Gal 6:7-8).

Mastery thru repetition.

Affinity through consistency.

Results from no work are empty gains.

Dreams with no work are naught but wishes.

Gains from shortcuts are, eternally speaking, hollow.

Unearned upsides can be wonderful blessings and grace from heaven, but if converted in my mind and heart to expectations or views that “I don’t have to work because good things simply come my way” or “I will succeed because I am deserving of success” … those attitudes diminish my soul and others’.

Which brings me to another reminder baked into those three words:

To touch base, to make contact with, The Rock … every day. That rock being the “lowercase” rock of revelation and the “uppercase” Rock of Revelation who is Jesus Christ.

To meekly remember I am able from the gift of choice.

To meekly remember I am forgiven and cleansed from His gift of mercy.

To meekly remember I am empowered beyond my natural strength by His gift of grace.

So . . . I pound the rock.

By |2022-05-22T21:13:56-06:00January 3rd, 2018|Faith, General Life, Marketing, Triathlon|1 Comment

Morning + Evening Routines (with screenshots)

Recently on Quora someone asked about AM/PM routines, and in my answer I shared screen shots from my morning routine app to show what I do. Thought I’d republish here with some improvements.

Do you have a morning/night routine? What are they?

I sure do.

At the advice of Noah Kagan I downloaded a morning routine app called Morning Rituals ($2 in the AppStore, no affiliate status).

AM Routine: Screenshots from my Morning Routine App

Here’s my exact routine for the time being. I make adjustments here and there.

I don’t follow it to a T every day. It’s a great guide.

Btw, Morning Rituals released an update this week and the new UI is way cleaner than what you see below. New UI screenshots in my follow-up post with friends’ routines.

Morning Routine App: Morning Rituals

Lights -> best way to speed up wake up

Weigh -> I weigh myself with a FitBit Aria scale which sends weight and body fat % to my FitBit account. I don’t worry about the day to day. I look at the trends.

Water -> we lose a lot of H2O while asleep, great thing to replace in the morning

Make Bed -> surely you’ve seen this:

#1 lesson of basic Navy SEAL Training: “If you make your bed every morning, you will have accomplished the first task of the day.” – Admiral William H. McRaven, University of Texas at Austin 2014 Commencement Address

Morning Routine App: Morning Rituals

breathe -> aka meditate aka sit still and listen without thinking

read -> a real paper book

Side bar: One of the common bits of “How to Be a Good Mormon” wisdom that, IMHO, gets tossed around rather cavalierly is “just read your scriptures for 15 minutes a day.” As a full-time missionary I relished in a full hour of personal study time each day and another full hour with my assigned companion. And that’s how every day went. I also had no idea what else I would do in the mornings to be productive, and it was the first time in life I wasn’t a full-time student. So for both those reasons, I loved having the study time as much as an approved diversion as it was independently fulfilling.

Outside of being a full-time missionary (and up until Jan 2016), I can’t say I made a habit of reading 15 minutes of anything on a daily basis. Perhaps through long sections of high school and college I did read 15 minutes or more every day — but that would have been assigned reading. Reading by assignment and reading by choice … two different experiences and outcomes.

Well, I’m now several weeks into reading just 10 minutes a day of what I want and simply because I want to. And … I’ve discovered … 10 minutes is plenty of time to cover a lot of meaningful ground. I think I discounted the advice to read 15 min daily because people said it like it was something everyone “should” do. But I never heard the advice by someone using first-person pronouns and present-tense verbs (see Clayton Christensen’s 2002 piece on this, just below “Constants and Variables”), and hence, I wasn’t believably touched or inspired by this suggestion.

Well, I am reading 10 minutes a day and it’s fantastic. It’s fantastic on the level of daily accomplishment, like making my bed; it’s fantastic on the level of seeing myself work through books when normally finishing a book had been a rarer occurrence; it’s fantastic on the level of starting my day by thinking about what I want to think about — typically something enriching — vs. staring with what my inbox wants me to think about.

Currently reading The Articles of Faith and other works.

10 ideas -> a la James Altucher and his Ultimate Guide for Becoming An Idea Machine

reddit -> I jump on to support people with questions on r/triathlon and r/running and learn from the other experienced people there

Morning Routine App: Morning Rituals

fig4 + lunge + pigeon -> stretches for my hips … I run a lot, this helps

crunch-push-plank -> core strength … I run a lot, this helps

workout -> 59 minutes is the max time allowable on the app right now … I do whatever my workout calendar calls for and either pause, exit, or advance this morning routine app to adjust accordingly

fuel -> post-workout: mix of carbs + protein is essential to solid recovery

Morning Routine App: Morning Rituals

goodies -> fish oil, safflower oil, vitamin D, digestive matrix; sometimes magnesium, glutamine and vitamin B12

shower + dress -> final stage to get ready for the day

stop -> is where the morning routine ends. I stop the timer, exit the app, and come back to that spot when it’s time for my night routine.

PM Routine: Screenshots from my Morning Routine App

Morning Routine App: Morning Rituals

stop -> I resume here at night time and use that minute to close up whatever I am doing

change -> a strong action and change of physical state to signal to my mind that the day’s work is done and I’m now headed for bed

“fish” “oil” + “night” “pill” -> a little healthy fat (fish oil, an omega-3) before bed is a good way for me to keep general inflammation down and support proper brain function. I take melatonin only if I’m feeling super alert and/or in a sub-optimal sleep environment.

Morning Routine App: Morning Rituals

brush -> duh

floss 1 tooth -> as Ramit Sethi says (on page 6), tell yourself to floss just one tooth and you’ll end up flossing them all

3 actions+attr -> I reflect on my day and write down 3 actions I am pleased I took that day and the attribute that I have that matches that action

read (part 2) -> while I listen to lots of books during the day, while driving, and so on, this time is reading a paper book. What I’m currently reading.

There are lots of options for your morning routine app and the routine you choose.

Good luck!

P.S. Find any of that helpful or inspiring? I’d like to know. Leave a comment or otherwise holler at me.

By |2021-01-15T15:37:23-07:00April 5th, 2016|General Life|2 Comments