Every successful business makes sure to run its operations smoothly— and cash flow is the bloodline to tackle it without any hurdle.
After 2020 many businesses have transferred to an online presence to take their global venture market. However, the challenges come later.
Among the failed e-commerce business, 29% have endorsed poor cash flow as the foremost cause. The reasons are clear— buying and payments gap, high inventory cost, and vague cash flow forecasting.
To overcome the daunting dry cashflow days— we have outlined seven tips to manage your cash flow for your e-commerce biz. Read on, and you’ll find it helpful.
Seven cash flow management tips for e-commerce businesses
1. Forecast with Streamlined bookkeeping
Without addressing the essential and primary, you’re missing the target— robust bookkeeping can be your savior.
Having clear and concise data to look for while deploying your strategy eliminates the gaps— which might happen if you don’t consider them.
Proper bookkeeping includes a timely recording of day-to-day endeavors and sales factors, eventually about effective decision-making with no defaults.
All of it boils down to formulating plans and forecasting your cash flow direction that you can change according to your e-commerce biz prerequisites and quickly point out errors.
2. Optimise your Payment Portals.
Set cash flow systems and remove delays of diversified payment methods and currency globally.
Invest in robust software to handle several payment modes and law compliance at par with global requirements.
Software designed for cash flow management makes it easy to illustrate in and outflow of your cash visually and rationally to analyze.
Eventually, it will help you become more aware of your outflows and inflows without going back and forth manually with business reports. And ultimately articulate cash-related strategies with one screen presentation.
3. Make sure your credits are aligned with your revenue.
Many online businesses have shifted their payment gateways and are now also reaping the benefits of credit cards, such as— vast users and acceptance, increasing sales with easy payment, and no further delays in payments.
Another thing to consider is only paying when you earn revenue or pay on the due date, not before. This way, you can maintain a cash balance by keeping some time between paying and getting paid.
Moreover, If your credit terms to suppliers are 45 or 60 days, keep your credit terms to customers for at least 30-days. You get the point—your incoming funds must be faster than your outgoing.
4. Gauge the Liquidation Period.
Before investing— ask yourself the period of conversion, or can this liquidate soon?
Confirm the nitty-gritty about heavy investment projects and don’t invest heavily in inventories immediately. Once the project gets started, you can arrange inventories according to that.
This will help you to cut down storage costs for unfunctional inventories.
If you want to get rid of excess inventories, make a reasonable offer and sell them to your customers; this way, you can reduce inventory costs and flow cash into the business.
5. Increase AOV and discounts for Short-term Cash Flow.
One of the straightforward ways to cash in your cash flow is by— increasing your product’s Average Order Value— including the cost of the product, packing and shipping charges, and marketing costs to acquire the customer.
For instance, if your AOV is $85, you can add additional charges to bump it up to $100 by using tactics like a product recommendation, cross-sell and upsell or for the physical product, you can set up a minimum order value for free shipping orders.
Further, you can obtain quick and short-term cash flow and new customers in your business pipeline by using discounts and early-bird incentives.
6. Look out for Unnecessary Overheads.
The easiest and most effective way to cut unnecessary cash outgoing is to track unimportant costs that aren’t bringing results or reaping benefits.
For example, to monitor your overall business operation and track financial management, you can hire contractors instead of committing permanent staff. This way, you can avail a wide range of expertise without rigid investment promises.
Again, if you’re looking for a warehouse, you can lease and channel that money into your other e-commerce business operation instead of buying one.
7. Automate and Optimise the process
To streamline your e-commerce transaction, shifting to software by simple integration and adding proactive data analysis is better.
You can simply function with various payment methods or currencies and handle multiple tasks.
Automate repetitive tasks like invoicing and billing with software— also, you can make a visual report that helps you better see and understand the patterns in your cash flow.
This will help ditch manual tasks and focus on core functionality without reinventing the wheel.
With the proper cash flow management tips, you can scale your e-commerce business— and take advantage of your vast global reach without worrying about sales channels, currency exchange, or moving backward and forward to manage inventory.
Our team of professionals provides you with real insights and proactively consults for your cash plans— cash flow management tips, best payment gateways for e-commerce, and solid bookkeeping practices.