Debt-Free, Cash-Broke: The Reserve Mistake Nobody Warns You About [E231]

Thanks to our partners Promotive, WickedFile, Maverick Shop Owners, and Overdryve

How much cash did your shop actually make last month — and how much of it is still sitting in the bank? If you paid off every dollar of debt tomorrow, would you have anything left to cover a bad month?

In this episode, Hunt Demarest, CPA, goes solo to tackle a topic he says trips up shop owners more than almost anything else: cash and reserves. He breaks down the simple rule of thumb for how much you should be keeping in the bank, then walks through four specific mistakes he sees shop owners make — from draining the business dry to (on the flip side) hoarding so much cash it becomes a legal liability, to the sneaky problem of debt payoff plans that leave owners debt-free and cash-poor at the same time. Hunt also shares the exact system he recommends clients use to set their own distributions so reserves never dip below where they need to be. Whether you're sitting on six figures in the checking account or wondering why you're always scrambling before payroll, this episode is a practical gut-check on the number that actually keeps a shop alive: cash.

What You'll Learn...

02:41 Cash vs. profit — the two flows of money every owner confuses

03:30 The reserve rule of thumb — 3 to 6 months of overhead

05:03 Why your ideal reserve depends on your shop's cash flow pattern

06:55 Mistake #1 — Draining your business of its own cash

09:51 The fix — how to set your monthly distribution the right way

14:24 Mistake #2 — The "champagne problem" of keeping too much cash

16:14 The profit-hold account trick — protecting cash without spending it

17:01 Mistake #3 — Parking reserves where they earn zero interest