The trickiest part of growing an e-commerce business is managing cash flow. If you can’t keep track of all the vital transactions, there is always a chance your business is going to fail, or you will have trouble achieving your set goals. Whether you operate a small franchise or a large scale e-commerce business, you’ll always encounter a variety of problems such as low margins, too much inventory and more. Keep in mind, the more cash flow you have, the better your e-commerce business is doing. To grow your e-commerce business successfully, you must make sure that there are no flaws in the way your cash flow is managed.
This post will share with you some few tips on how to manage cash-flow for a growing e-commerce business.
1. Invest in the right cash flow software
One of the problems affecting e-commerce businesses today is bad record keeping. An executive vice president of businesses & commercial enterprise at RBS, Quincy Miller says that no matter how easy keeping track of all the payment seems, many small businesses forget. While this might seem less of an issue, it might be inconveniencing finding out later that you owe big money to another company because you forgot and the due date passed.
If this continues to happen all the time, it might slow down the growth of your e-commerce business. Because the money that goes in and out of your business needs proper regulation, there is always a lot of critical tasks to be handled, and that is why you are always advised to invest on the right cash flow management software. I would suggest that you choose Pulse.
2. Have a separate bank account for your e-commerce business
One of the common mistakes many e-commerce business owners make, especially those that are still struggling to get on their feet, is having one business account for both personal use and business. It doesn’t matter if you are still using your personal bank account to get your business off the ground. The moment your e-commerce business is up and running, it becomes extremely important that you have a separate bank account for it.
Immediately after you’ve done this, make sure you apply for a credit card that you can use to complete transactions that only aim to build your e-commerce business. The point of doing this is to ensure that no personal transaction you’ve made is conflicting with the operations that are related to your business. Besides you’ll benefit because many banks offer information that can help you manage your cash flow without stress such as transaction reports and more.
3. Reduce your inventory
For a growing e-commerce business, having a surplus of a product that is not selling can be a sign of impending trouble. With too much inventory, there is always a chance you will get in financial trouble, and that is what you don’t want. To stay out of trouble, buy from your suppliers only what you can sell easily. Also remember to check your inventory regularly for any stock that is outdated. If you find any item that has been in your store for too long try to get rid of it before making any more orders.
4. Delay your payments
Unless you have an important reason to make your payments early, don’t hesitate to pay at the last minute. Just ensure that you don’t miss the deadline because you might have to pay an additional fine. Also take some time to collect all the receivables without using the funds whose credit lines are short-term.
However, if you have never had any problems paying earlier or you get some reward for it such as a discount then it is okay to pay a bit early. In case your suppliers don’t allow pay break, request for it. They also want to collect their receivable fast with yours included.
– Give discounts to customers who pay earlier – This makes it easy for you to collect your receivables.
– Always ensure you have a cash reserve – Allows you to focus on growing your e-commerce business.
– Have a proper cash flow plan – Plan for all the major expenditures to prevent shortfalls.
Cash flow management is never an easy task for e-commerce businesses, in particular for start-ups and businesses which are still struggling to survive a competitive market. While having large sums of money coming in and going out is a healthy sign, it is always easy to miss a major transaction or make mistakes that can largely impact your business. Hopefully the four tips given here will help you understand how easy cash-flow management can be with a little planning and forward-thinking.