4 Tips for Managing Cashflow in an E-Commerce Business

4 Tips for Managing Cashflow in an E-Commerce Business

When you are operating a startup e-commerce store, there are always more things to think about and actions to complete than there are hours in the day. As a result, it’s easy for entrepreneurs to spend their days focused on everything but the venture’s cashflow.

However, when you consider the fact that one of the most common reasons why businesses fail is due to lack of funds or overspending, you can see that this is one area of operations that needs to be front of mind at all times, even if you’re running a lean e-commerce store from the start.

If you’re keen to make sure your business is a resounding success and around for the long term, you must learn to keep track of your finances and keep cashflow in control. Read on for four key strategies you can follow today.

1. Ensure Customer Payments Are Timely

One of the best ways to manage cashflow when you operate a business is to make sure that customer payments are made on time, and that you don’t have to chase funds or wait for weeks or even months at a time for funds. instantaneous credit and debit card transactions, not all do. Some firms still allow customers to post out checks or to pay by direct credit.

While it is definitely a good idea to provide customers with multiple payment options, you will aid your cashflow if you limit these to quickly-transacted ones. On top of accepting debit and credit cards, you might also like to use PayPal and mobile wallets. Or you could encourage customers to set up a direct debit process, or use a payment processing firm that makes it easy to accept check by phone transactions. These will all help you to receive funds sooner rather than later, and free up cashflow as a result.

Reduce Inventory and Other Costs

Next, it is important to constantly be on the lookout for ways you can reduce your venture’s inventory levels and cut back on common business costs. For starters, examine your stock on hand often so that you are very clear about what items are moving well and what products have been sitting on the shelf gathering dust for months.

You will free up much-needed cashflow if you buy less of the items that don’t sell well, and put that money into fast-moving goods instead. You should also check your inventory for damaged or outdated stock, and discount it so that you can move it out of your warehouse and bring in some cash nice and quickly.

It is wise, too, to find ways of freeing up cashflow by spending less money on other business costs. While you may not think it would make much of a difference, eliminating even small and regular expenses can make a significant difference to your overall cashflow result. There are various areas you can look at here, but consider spending less money on, or finding better deals for, things such as:

  • Online advertising
  • Utilities providers (e.g. internet, phone and electricity)
  • SEO services
  • Newsletter send-outs
  • Postage
  • Banking fees

Renegotiate With Suppliers

When you want to free up cashflow in your organization, it is also a great idea to speak to your regular suppliers to renegotiate better terms. For your continued patronage, see if you can be given more favorable purchase and shipping terms in the future.

For example, you might like to ask for:

  • Free or discounted shipping on your orders
  • Longer payment terms. such as moving from payment-on-receipt to 30-day terms, or from monthly accounts to 60- or 90-day terms
  • Discounts on repeat buys

You might also be able to negotiate to receive bonus goods if you spend more than a pre-determined amount each trading period, or the opportunity to return goods if they do not sell within a set period of time.

Increase Sales

Lastly, a quick way to improve your venture’s cashflow is to bring in more sales so that you have extra money flowing in. There are numerous ways to increase sales. For example, you could:

  • Run a promotion for current customers
  • Start selling your products on third-party sites (such as EBay) in order to increase your client base
  • Run a competition with the prize being stock you already have on hand, and the condition of entry being a sale

Another effective way of increasing revenue without spending extra money is to start pre-selling products before you actually order them from suppliers. There are multiple benefits to this. For starters, you get to bring money in from paying customers before you have to outlay funds for the stock. In addition though, you also get to test out the market demand for any new goods you’re thinking of selling, so that you don’t end up tying up money on products which your customers simply aren’t interested in.

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