Tips to Manage Cash Flow for e-Commerce Businesses

e-Commerce can be unpredictable (sporadic sales, issues with supply or delivery), due to this the financial health of your business fluctuates! And some of those fluctuations are predictable, such as heavy sales before winter holidays versus slow summer months.

Improving cash flow is a smart move for any business. It doesn’t matter how great your business model is, how profitable you are, or how many investors you have lined up. If you’re looking for one area to focus on that will have a dramatic impact on your business, this is it.

However, cash flow management for online businesses is much more complicated than for offline. You have to take into account multiple sales channels, different payment processors, and multicurrency transactions in your accounting.

Here are some tips to manage cash flow for eCommerce: know where you stand at all times:

  1. Accurate Bookkeeping: Guarantees precise financial reports. Categorized payment data (product, customer, location, fee, tax, etc.) will facilitate the preparation of financial reports. As a result, you will get a good picture of the most high-demand products, profitable locations, and loyal customers. However, synchronizing all transactions in your accounting platforms such as QuickBooks and Xero can be time-consuming and nervous work.
  2. Automate regular payments, coming in and going out: Like invoices, bills, expenses, receipts — all the regular payments your business makes or receives can (and should) be automated. Tools like Quaderno make it easy.
  3. Keep an eye on marketing and social media: The best ways to reach your potential customers could change. Maybe your target audience isn’t on Facebook anymore; maybe they’ve moved to TikTok, or to the next new platform. Stay relevant and effective.
  4. Schedule business expenses: Don’t struggle in trying to figure out how to cover expenses because you still didn’t get any revenue from sales. If you usually get paid at the end of the month, you can move some expenses to this period too. For example, you can make a deal with your suppliers to make payments within 60 days or ask for the deferment of payment. Line up your biggest expenses to be parallel with your highest inflow.

  5. Run promotions to boost cash flow in the short term. Cut costs where you can. You could do a classic sale on physical products. For digital products, this could be discounts on brand-new signups: give half off for the first three months, or waive a registration fee.

  6. Manage inventory smartly: Don’t overstock on slow-moving items. Look at monthly quantities needed to spread out your orders of such items as much as possible or drop them entirely and plan your campaigns well in advance to project inventory needed and the cash needed to provide it.

  7. Get your money from customers ASAP: An option to increase sales is the buy now, pay later apps because they let customers pay for purchases in installments while you get your money right away.
  8. Avoid impulse purchases or big investments: This relates to day-to-day expenses things you may want but don’t need and buying them might make you delay payroll tomorrow. So think twice.

    Also, for small e-commerce businesses, it might be a better idea to lease equipment or avoid renting a full warehouse go as needed. You won’t shell out a lump of money and your other payments won’t be threatened.

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