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

Ideas for LDS Sacrament Meeting Talks

A friend posted: “I need some good topics for Sunday speakers. Hit me up with topics you have liked or would like to hear about.” Without any hesitation I banged out this list of ideas for LDS sacrament meeting talks.

A few of the immediate reactions:

Reaction to my ideas for LDS sacrament meeting talks

“If I ever write a book, you’re picking the title.”

“Holy cow! Where did all these come from? Seriously the titles alone speak a sermon.”

“Nat holy cow. If you just came up with those that is mind blowing.”

Spice up your Sunday meetings with these starting points off the beaten path.

If you write a sacrament talk or ask someone to speak from one of these titles, send me a copy or comment.


34 Ideas for LDS Sacrament Meeting Talks

When People Don’t Apologize: Forgiving and finding reconciliation with God

Would borrow from Forgiveness + Tribulation, a talk I gave fall 2019.

Honoring Fallen Parents: The Fifth Commandment and Romans 3:23

The Fifth Commandment enjoins: “Honor thy father and thy mother.”

Romans 3:23 says: “For all have sinned, and come short of the glory of God.”

How can we, how do we, honor parents … when they have ALL fallen short—at best—and done real harm, at worst?

Mediating Identities: Being an independent agent AND part of a family, part of a ward, part of a Church at the same time

… for there is a God, and he hath created all things … both things to act and things to be acted upon … Wherefore, the Lord God gave unto man that he should act for himself.

2 Nephi 2:14-16

[M]en should be anxiously engaged in a good cause, and do many things of their own free will … For the power is in them, wherein they are agents unto themselves.

D&C 58:26-27

vs.

And let every man esteem his brother as himself … And again I say unto you, let every man esteem his brother as himself. For what man among you having twelve sons, and is no respecter of them, and they serve him obediently, and he saith unto the one: Be thou clothed in robes and sit thou here; and to the other: Be thou clothed in rags and sit thou there—and looketh upon his sons and saith I am just? Behold, this I have given unto you as a parable, and it is even as I am. I say unto you, be one; and if ye are not one ye are not mine.

D&C 38:24-27

And the glory which thou gavest me I have given them; that they may be one, even as we are one: I in them, and thou in me, that they may be made perfect in one.

John 17:22-23

Forgiving Ourselves: Letting go of shame, expectation, guilt and perfectionism

The Appeal of Hakuna Matata, and Gospel Prompts for Finding + Making Meaning in Shouldering Responsibility

“Time Isn’t Found, It Is Made” — and other pedestrian truisms the gospel turns upside down

I believe “time isn’t found, it is made” is a Henry B Eyring line. Need to verify.

We’re All Wart: How The Sword and the Stone helped me rediscover what it means to be a child of God

There’s so much to unpack from these opening 8 lines.

https://www.youtube.com/watch?v=7MuUQk-XwgA

Heavenly Mother & The Tree of Life: Symbols of Divine Femininity

7 Years of Plenty and 7 Years of Famine: What I am really learning to lay up in store for my family

The Good Samaritan: Seeing myself in every character

I Am Alma Too: Conversations with my present-day children of varying degrees of faith

(I don’t have kids. To someone who does, go for it.)

From Obedience to Integrity: The personal transformation to leader from follower

Skeletons in Our Closet: What to do when family history uncovers unsavory characters

The Prodigal’s Sibling: Learning to love as my father did

Cardinal Truth: Spiritual directions intimated by North, East, South and West

Seeing Thru a Glass Darkly: The beams that got in the way of knowing my parents, siblings and spouse

The Kingdom of God is Within Me … so why do I place so much stock in others’ accusations?

The Tarnished Rule: Consequences of misapplying The Golden Rule, and how I finally buffed out the error

Why Hope When You Can Ask … and Act?

Being Nice and Cowardice: Which, really, am I being?

Being Even As He Is: A Chapter on Courage

Every Day is a New World: Living with Creative Force in Every Moment

Clinging to Dregs: The unseen upside to keeping ourselves dirty and why we make that horrible tradeoff

Embracing Possibility: The absolute terror of becoming the best possible versions of ourselves

Letting Others Grow: The petty ways I’ve kept my friends & family small

No One is Coming: Stand Up and Lead Your Own **** Life

Taking Responsibility: Voluntarily shouldering the burdens of mortality and climbing upward to The City on a Hill

Empty Handed at the Pearly Gates: Coming to grips with my own vapidness from a life of ease

Oh, So You Think YOU Could Be a Prophet?

Admitting Laman and Lemuel are there to Mirror Me

Lehi and Alma: Grace for parents who “failed”

Ether 12:27: Weaknesses and Epic Fails which only now, a decade later, I can appreciate and be grateful for

Leaning on The Atonement to Overcome Humiliation

The Sound of Silence: Answering my own prayers

There you go. What ideas for LDS sacrament meeting talks do you have now?

By |2021-12-22T17:15:01-07:00April 27th, 2021|Faith|5 Comments

“What should I do in New York City?” All Of This.

Since I lived in Manhattan for 5 years (New York 101: Manhattan is an entire island, and it’s 1 of 5 ‘boroughs’ that make up New York City), people often ask what they should do when they visit.

If you’re an American, you ought to know at least this much about NYC. “The City” comprises 5 boroughs. Manhattan is an island. Staten Island is one too, and a joke. The Bronx is up north, Queens clockwise from there, and then wrapped inside Queens between there are Staten Island is Brooklyn. Queens and Brooklyn are the far western end of Long Island (also an island, pronounced “Lawn GY-land”). That said, Manhattan is where everything you’ve ever associated with New York City is. And heads up, if you forget this is what NYC really looks like, you’ll get all whacked looking at the MTA Subway map which is completely out of proportion.

When in New York, do these things

Live Jazz: VJO Monday nights at Village Vanguard

Pizza: Juliana’s on Old Fulton under the Brooklyn Bridge, Motorino in the East Village, Don Antonio’s on 50th in the Theater District. If you want to venture beyond Manhattan for good pizza: Roberta’s and Di Fara are excellent. Di Fara’s is a legend. (btw, if you go to one of these places OUTSIDE New York you’re nuts if you expect the same experience)

Note on Juliana’s: Some people might tell you to go to Grimaldi’s on Old Fulton. Up until a few years ago, that was the advice you wanted. You see Patsy Grimaldi is one of New York City’s Pizza Godfathers. And, true enough, he opened a shop on Old Fulton. Then in 1998, someone convinced him to sell the business, including the rights to his name. The lure of retirement was sweet, so Patsy sold his name.

That person ran Grimaldi’s into the 2000s until 2011 when a little dispute with the landlord arose. By 2012 he was out, but not for good. He simply opened shop on the corner of the same block. He bought an old bank and, still owning the name, slapped “Grimaldi’s,” above the front door. To this day every tourist from Torrence to Tokyo doesn’t know any better, so what happens on Saturdays? A 2-hour line forms at Grimaldi’s doors and snakes down to the water.

HOWEVER . . . those who know, know that when O.G. Grimaldi got wind of the dispute between the landland and the owner of his namesake, Patsy started making moves. No one who loves food enough to open a restaurant ever truly retires. I mean really. Here in Utah the family behind Gloria’s Little Italy spent a couple years off the map and Florida and where are they now? Back in Bountiful with a pizza shop.

Patsy was restless. You bet he was making pizza from 1998 to 2012. And with the tenant of his shop on the way out, it was time. No way would he hold back … the original location, AVAILABLE! So move he did! Right.Into.His.Original.Shop. Patsy rebuilt the oven, refreshed the dining area and set up a bar so guests can watch him and his proteges do their finest work. And just before opening, he christened his comeback with a new sign, emblazoned with the name of his mother: JULIANA’s.

Burgers: Shake Shack (handful of locations; there’s even one in JFK and Las Vegas and other places, so don’t go out of your way for this, but say you go to the Museum of Natural History, well, it’s across the street). If you have time and want to try a +$20 burger, start with the Black Label at Minetta Tavern. If you don’t have time, try your luck watching the bar like a hawk and snag 2 stools as soon as they open. Full menu service there.

Cookies: skip Levain, go to City Cakes on 18th and 8th

Pastries: Pretzel croissant (City Bakery, on 18th and 5th. If it’s cold, they have killer hot chocolate too), a REAL cronut from Dominique Ansel Bakery (arrive an hour+ before the store opens to get a spot in line. The cronuts sell out once the store opens)

Cheesecake: IMHO it was Carnegie Deli, but they are now closed and only ship. Juniors is fine (it’s convenient). Looks like 2 Little Red Hens in the UES is worth checking out. Eileen’s is also good.

Asian: Oh my, how did I leave this out for months? Xi’an Famous Foods (original in Chinatown, convenient locations on 45th near GCT, in the UWS on Broadway and 102nd and elsewhere). There’s only one thing to get your first time: the N1, spicy cumin lamb with hand-pulled noodles. Never seen another noodle like this anywhere. Yum. This is NOT a sit-down restaurant. You MIGHT find a spot at the counter to put your plate and eat while you stand or sit on a stool. Make plans to eat it hot and fresh. It’s better that way.

Korean BBQ: KOKO Wings opened around the corner from my front door and man alive I was a frequent customer. Small combo for 1, medium for 2 or large if you’re starving. Sauces: half and half every time. Sides: 2 words . . . kimchee coleslaw. You can also jaunt over from Herald Square a block and zigzag your way from 35th to 31st (btwn 5th and 6th) poking your head into just about any storefront there and find yourself some delicious Korean BBQ.

Broadway: Try your hand at a lottery (that link or Google ‘playbill student rush’) OR if they offer a “rush” option in the morning, show up 2.5-3 hours before that ticket window opens with a cushion and a good book. You’ll be first in line to get, typically, a front-row ticket.

Dinners: Buvette (West Village), Westville (couple locations)

Fancy-A Dinners: Daniel, Eleven Madison Park, Gramercy Tavern, Minetta Tavern, The Modern at MoMA, Per Se, Blue Hill, ABC Kitchen, L’Artusi (or any of these)

Don’t miss: the grilled corn-on-the-cob at Num Pang Sandwich Shop

Comedy: EastVille Comedy Club or Comedy Cellar on MacDougal. You never know who’s gonna show up that’s not on the bill.

Experiences: sauna/steam/spa at the Russian-Turkish Bath House in the East Village. Walk The Mall in Central Park and finish at Bethesda Fountain/Terrace. Top of the Rock. Walk the Brooklyn Bridge. Take the Staten Island Ferry (once it lands in Staten Island, don’t get off … just get right back on and go back to Manhattan. Ain’t nothing to see in Staten Island). The Highline. World Trade Center plaza, 9/11 Memorial. Take the N/Q or F/D to Coney Island. If you go when it’s warm, take the LIRR from Penn Station to Long Beach.

As you can see it’s ludicrously easy to entertain yourself in The City of New York.

New York City - Nat Harward - Radio City Music Hall
Radio City Music Hall – 6th (Avenue of the Americas) & 50th – a few minutes before Bon Iver in concert

In part, that’s why I left.

But while you’re there . . . have fun 🙂

Questions? Looking for something else? Leave a comment and I’ll get back to you.

By |2021-05-06T16:58:44-06:00May 7th, 2017|General Life|0 Comments