Kerry: We have all heard that classic small business advice: “Do not run out of money.” Sounds simple enough, until you are the one sweating payroll, juggling bills, and refreshing your bank app like it is a slot machine. I sat down with my friend and trusted business mind, Tom, to talk about one of the most common (but least talked about) struggles for small business owners: cash flow. What is it? How do you manage it? And how do you keep from chasing it? Here is what Tom had to say.

Tom: Last week I had a great conversation with a local small business owner about cash flow, or in their case the lack of it. Simply put, they had a cash flow problem. They were spending a lot of time doing something I call “chasing money.” That game where you do not have enough in your account to cover payroll coming up on Friday, so you are watching the credit card deposits hitting your account, knowing that should make up for the difference. But just in case, you choose to hold off on paying one of your weekly vendors so you are sure you will have enough. Of course, that creates a double payment to that vendor next week, but that is next week’s problem. This is chasing money. And sadly, it is the reality for a lot of small business owners.

So we dug in, starting with ways to get that bank account growing. This was a business with about 10 employees, big enough to have a few managers who were helping with the day-to-day operations. I asked, “What do your managers do to help with cash flow? I mean, if they are in charge of accountability throughout your organization, then they can easily be in charge of items that impact cash flow.”

And his answer? “Nothing, really. Actually, the problem is they really do not understand how cash flow works because they do not have any background with this business finance stuff,” he explained. I started with the simplest way to get them up to speed so they can make a difference. A little bit of accounting 101.

There were three terms it would help for your managers to understand: sales, net income, and cash flow. If they understand these, they will have the base to understand how they can help.

Starting with sales. This might be referred to as revenue or gross receipts, but it is all the same thing. It is the total amount of income your business brings in, not including sales tax or expenses. Typically, if you have a basic Income Statement or Profit and Loss Statement, you can show your managers your sales or gross revenue.

Secondly, we have net income. This is your total sales minus your total expenses. There are variations in accounting on this number, but in its simplest form, it is just that: sales minus expenses. Net income is what your business pays taxes on (in general), and it is the best way to tell how your business is performing. Again, you can get this number from a basic Income Statement or Profit and Loss Statement.

Lastly, there is cash flow. This is the fun one, because in the end this is what makes the biggest difference for small businesses. Cash flow is net income plus or minus any other cash-impacting items to the business that are not a sale or expense, such as loan payments, accounts payable (bills you pay), or accounts receivable (customer invoices they have not paid yet).

Although there are different statements you can use for this, the best one for small business is your bank account. In the end, you are measuring how much cash you have. For small businesses, this tends to be the most important number.

Kerry: OK, so let us say your team now understands those basics. How do you actually get them involved in fixing the problem?

Tom: You need to get their buy-in. Sit down with them and explain your situation. Cash is tight. If we want to ensure a healthy company that is around for the long run, we need to have everyone help to get to a better spot. Ask them what suggestions they have that they might have control over. Are they involved in sales? If so, maybe they can help increase those sales by 5 percent. Do they do some type of ordering? Perhaps there is a way they can help control costs a little more by shopping around for better prices. Or perhaps this is just a conversation with them and their suggestion that you implement that price increase you have been so reluctant to do.

The fact of the matter is that by yourself, you are just one head working on the problem. But with them, you are three or four heads thinking about a solution. And three or four sets of eyes can see better what is going on with the day to day. Let them come up with those ideas and make it a measurable goal—something that you can come back to and measure to see how they are performing. I guarantee you, one or two areas for each manager to focus on to improve cash flow will help ease the burden immensely. I know this seems simple, but it works.

Kerry: So let us end with the big question. How much is enough? What is the target number to feel financially solid?

Tom: If you want to apply for a loan as a business, the general rule of thumb is three to six months of expenses as reserves. I know, that is a lot. Or at least it might seem like a lot if you are stuck trying to operate day to day. So, start somewhere smaller. Maybe shoot to have a month’s worth of operating expenses in your bank account at the end of a month. Because if you can save a month’s worth, you can save two months’ worth. But start somewhere and have a goal that those measurables you gave to your managers are helping you get to.

I finished with him, “In the end, this is not about money. This is about running a healthy business. One of the hardest burdens for us small business owners is knowing that the livelihood of others depends on us. If we fail, their jobs go away. So the best way we can care about them is by making sure we are responsible and healthy so they have a job.”

Kerry: Tom, that is such an important reminder. Cash flow is not just a spreadsheet. It is the heartbeat of your business. And the best part? You do not have to tackle it alone. Whether you are a solo entrepreneur or leading a growing team, there are small, smart steps you can take today to gain control and protect the business you have worked so hard to build.

We will be back soon with more Business Banter with Tom and Kerry. Got a question you would love us to dig into? Send it our way. We are always up for real talk and real solutions.

Kerry Solmonsen is the Executive Director of the Enumclaw Chamber of Commerce and community advocate with a passion for helping local businesses grow and thrive. With a background in leadership, sales, nonprofit development, and business development, she brings both heart and hustle to her work. Whether she’s organizing a parade, launching a community initiative, or championing small-town entrepreneurship, Kerry is all about connection, collaboration, and creating momentum that matters.

Thomas Sauvageau is a lifelong entrepreneur and seasoned business coach with a passion for helping small business owners succeed. Over the past 20+ years, he’s owned or partnered in more than 30 businesses across industries like finance, real estate, and hospitality, many of them right here in our community. While he’s no stranger to the highs and lows of entrepreneurship, Tom’s true calling is helping others grow thriving, values-driven companies. As a Certified EOS Implementer®, he now works with business owners across the region to bring structure, clarity, and momentum to their vision. www.eosworldwide.com/thomas-sauvageau