8 Cash Flow Management Tips for eCommerce Businesses

As an ecommerce business owner, managing your cash flow is crucial to your success. It’s not just about making sales and generating revenue; it’s also about ensuring that you have enough money to cover your expenses and keep your online business running smoothly.

Keeping your accounting organised is an essential part of business management. To help you with this, we’ve put together a list of eight useful cash flow management tips that help you streamline your ecommerce business accounting and maintain a high level of organisation.

Tip #1: Monitor your cash flow regularly

It’s important to keep an eye on your cash flow on a regular basis. This means you need to consistently review the following:

• financial statements
• tracking expenses and revenue
• staying on top of accounts payable and accounts receivable

By doing this, you can identify potential cash flow problems early and take action to address them before they become bigger problems.

Tip #2: Create a cash flow forecast

Apart from constant monitoring of your cash flow, forecasting is also another important aspect of cash flow management. A cash flow forecast is a projection of your expected cash inflows and outflows over a specific period. By creating a cash flow forecast, you can anticipate any potential shortfalls in cash and take the necessary steps to prevent them. 

Constantly creating and reviewing your cash flow forecast can assist you to stay on top of your finances and make informed decisions for the future.

When it comes to creating a cash flow forecast, there are a variety of tools and resources available to help you get started. Popular options include using Microsoft Excel or Google Sheets to create your own template, or utilising one of the many free templates available online to help you get the groundwork done quickly and easily. 

Whatever option you choose, using a cash flow template will definitely be helpful in keeping track of things efficiently and effectively, helping you to stay on top of your finances.

Tip #3: Manage your inventory effectively

Inventory management is crucial for e-commerce businesses. Holding too much inventory ties up your cash, while holding too little can result in lost sales. To avoid these issues, it’s critical to have a system in place that allows you to track your inventory levels and make adjustments to your orders accordingly.

Proper inventory management isn’t just important for your finances; it can also have a significant impact on your customers’ experiences. By staying on top of your inventory levels, you can provide accurate and up-to-date stock information to your customers, leading to a better overall shopping experience.

This not only helps to ensure your e-commerce business runs smoothly and efficiently, but can also lead to increased profitability as satisfied customers are more likely to make repeat purchases and recommend your business to others.

Tip #4: Consolidate all of your payment processors into a single accounting platform

If you’re running an e-commerce business across multiple platforms, one of the first things you’ll need to consider is how to organise your revenue for accounting purposes.

The biggest challenge that businesses face when using multiple platforms is that each payment processor has its own fee structure. For example, if you’re selling products on Shopee and Lazada and accepting payments through Stripe or Shopee Pay, each of these charges a different percentage for transferring payments.

Keeping track of all this data and manually recreating it in your accounting books can be a time-consuming process. The good news is that there are accounting software options available in the market that offer automation features to streamline this process for you. 

If you are using an online store builder, some of it comes with automated dashboards where all data is tracked under one platform and in a report. 

By automating your revenue tracking, you can save time and reduce the risk of errors in your financial reporting.

Tip #5: Negotiate payment terms with suppliers

Negotiating payment terms with suppliers can help improve your cash flow for a few reasons. Firstly, by extending the payment terms, you have more time to pay your bills, which can help with managing your expenses and avoiding late payment fees. 

Secondly, negotiating payment terms can also help you better align your cash outflows with your cash inflows, which can improve your overall cash management.

Finally, negotiating payment terms with suppliers can also help you build stronger relationships with them, which can lead to better pricing and more favourable terms in the future.

Tip #6: Review your pricing strategy

One way to improve your cash flow is to review your pricing strategy. Make sure you are pricing your products appropriately to cover your costs and generate a profit. If you’re finding it difficult to maintain a healthy cash flow, consider raising your prices or offering different pricing tiers for your products.

Examining your pricing strategy is an effective means of enhancing your cash flow. It is crucial to price your products suitably to cover expenses and earn a profit. If your cash flow is not optimal, you may consider the following tactics:

• Increasing your prices
• Presenting diverse pricing options for your products
• Source for a more economical supplier

Tip #7: Keep a cash reserve

Maintaining a cash reserve is essential to address unforeseen expenditures and emergencies. By doing so, you can prevent depleting other sources of funds that can potentially disrupt your cash flow.

Tip 8: Monitor your metrics

Finally, it’s important to monitor your metrics to gauge the health of your online business. Important metrics like revenue growth, profit margins, customer acquisition costs, and customer lifetime value should be tracked regularly.

This will give you a better understanding of your business’s financial performance and help you make informed decisions about managing your cash flow.

Conclusion

Managing cash flow is a critical aspect of running a successful ecommerce business. By following the eight tips outlined in this article, you can improve your cash flow and keep your business running smoothly.

Regularly monitoring your metrics can help you gain a better understanding of your business’s financial performance and make informed decisions about managing your cash flow. With careful planning and execution, you can maintain a healthy cash flow and ensure the long-term success of your ecommerce business.