What is the meaning of "work it out"?

I found the following sentence on a TV series. In fact, I cannot understand the meaning of “work it out” in it. Therefore, I would be grateful if someone could let me what the meaning of this phrase is.

Sister : I know you've been helping Jess with the floors and we owe you a lot of money. I can write you a cheque.

Her friend: Jess and I will work it out.

In addition, is it feasible to replace the above sentence with the following one.

Jess and I will work on it.

Please note that the conversation related to this happens with this scenario. There are two sisters in the TV show and one of them does not have a well paid job. Plus, she borrows some money from one of rich sisters’ friends. This conversation happens between the girl who has a well-paid job and her friend who provided her sister with some financial assistance.