10 tips on managing cash flow in e-commerce business

Many e-commerce firms shut shops shortly after launch due to poor management of cash flow. Here are ten tips on managing the cash flow of your e-commerce business to flourish.

  1. Break even

To run a successful e-commerce business, it is not only pertinent for you to know your cash flow but also to be in a position to set a goal to achieve your break even without being cash-strapped. Judicious use of your start-up capital till you reach breakeven is the key.

  1. Cash-flow management

Rather than eying profit, all you need to do is to set sight of making a breakeven by setting a target, even while you are wary about the cash-flow and the pattern of spending. If you spend frugally and maintain a tight leash on the cash-flow, you are bound to reach the threshold level of business that will allow you to achieve the breakeven and the eventual profit.

  1. Always maintain a cash reserve.

Every startup should expect shortfalls. They happen to everyone, even with the best plans in place. But your survival likely will depend on how you traverse those shortfalls. Having cash reserves for those lean times lessens the blow, the stress, and the distractions, and allows you to stay focused on growing your business.

  1. Efficient Fund Management

It would be prudent to hire a resource to handle the finance and accounting than you attempting to handle on your own. Big firms with bigger capital investment would look for a Chief Finance Officer. If yours is a mediocre firm, then you can ask your trusted lieutenant to handle cash-flow in an organized manner till you make a breakeven. When you go to the next level, you can consider hiring a CFO. Also, there are software platforms such as inDinero.com, thus simplifying the processes of cash management. If the person who is handling your cash-flow also happens to be a tax consultant, then the business will run smooth, as the person knows perfectly well about the deadlines for filing your business tax returns, thus avoiding penalties and interest.

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  1. Receivables

By making any invoices ‘due immediately’ and limit the use of net terms longer than 15 days help you to delegate the task of keeping an eye on receivables and customer follow-up to get money in as quickly as possible.

  1. Early Payment Collection.

Instead of waiting for normal net terms to pay out, it is advisable for you to offer your patrons a discount, thus motivating them to pay early.

  1. Extend Payables

To expedite your receivable payments as quickly as possible, you need to negotiate with your suppliers to get the best deal you can. You can also extend payables to net 60 or more.

  1. Frugal Spending

You should have perfect knowledge about essential purchases and the necessary expenses chalked out in an organized manner. Minimising spending and eliminating costs are the key to quicken the pace of the breakeven of your business.

  1. Smart Hiring

Human resources are inevitable to run a profitable e-commerce business. Smart hiring is the mantra for your successful business. Even if it is a little more expensive, hiring a person with excellent skill sets who can multi-task is better than hiring two or more overheads with average skill-sets.

  1. Tapping Technology

Last, but certainly not the least is the reliance on technology that would back up your files and cash-flow spreadsheets to secure cloud storage, as it is very important to keep your data secure and also to access from anywhere you have an internet connection.

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