Cash Flow Guide For Your E-Commerce Business

Even with the rise of alternative payment methods, when it comes to business finances, cash remains king since it's the reality. Having immediate access to cash allows you to pay for unexpected bills, sustain the payroll of your staff, and continue production. A healthy cash flow management is a sign that your business is thriving.

A U.S. Bank study reveals that about 82% of businesses fail due to cash flow management problems. This can be a terrifying figure to business owners.

As a business owner or entrepreneur operating online, it's essential to understand e-commerce business' cash flow to spot any problems early on and manage them properly before things get worse. While many factors implicate cash flow mismanagement, one sure-fire sign that indicates something is wrong is when the amount of your expenses exceeds the sum of your available cash.

Cash flow issues will come to any business, sooner or later. The key to managing it properly is by checking on it regularly and performing cash flow forecasting so you can take the necessary steps to address or stave off potential problems. Below are some tips on how you can take control of your cash flow to make your e-commerce business more robust and profitable.

• Use a reliable cash flow management software

For any business that's starting out, it's essential to have cash flow management as part of the business plan to help keep track of the money or payments flowing in and out of your business. This way, typical payment issues, like employees forgetting when they paid for supplies or you not being aware of paying an expensive bill, are avoided.

Regulating your cash flow can be a tedious task, and it's a little bit overwhelming to fill in the spreadsheet. This is where a cash flow management software comes in handy, as it can reduce the hours you spend on a spreadsheet to minutes.

You can find software that does more than simply punching in the incoming and outgoing expenses. Some systems provide a cash flow forecast that allows you to predict where your business is going, letting you make informed and confident business decisions.

• Manage and update your inventory

If you're having difficulties with selling items and you have too much inventory at hand, it could put you on a tight financial spot. You have to pay your suppliers and fixed bills, and if you're not making money as quick as your outgoing cash, you may find yourself crunched for money.

The best way to avoid this is to monitor your catalog to help you avoid buying more supplies than you need. Before calling your supplier for restocking, check your inventory first and make sure it's updated, so you know which items are not selling fast as you expected. Review your inventory carefully and think over the products that aren't converting to sales.

• Open a separate bank account for your business

One of the common mistakes new business owners make is running their business and using their personal bank accounts and credit cards for their company's expenditures too. It is best practice to create a separate bank account for your business to make its finances easily traceable.

If you have yet to do this part, you can apply for a credit card for your business-related purchases to your chosen bank. A lot of credit card companies provide detailed bank statements made over a period of time. You can use this information for your cash flow management and budget for your business.

• Have an emergency cash reserve

A huge part of starting a business is hitting a few financial bumps on the road. It's not uncommon to experience unsteady revenue. There will also be slow seasons where you'll need cash on hand to cover overhead costs. Do you think your e-commerce store can get by if business slowed down for two or three months?

This is why building an emergency cash reserve is crucial to any business. Having a cushion of cash you can use for unexpected expenses or overhead costs can be a lifesaver. Without it, your business may suffer quickly.

• Find an excellent accountant

Cash flow problems sometimes spring out of nowhere. If you're doing a lot of business tasks yourself, it may be better to work with an accountant who can help handle your business finances. This is highly essential for entrepreneurs who don't have a financial expert looking at their business numbers.

A proactive and well-rounded bookkeeper can help point out the inconsistencies in your cash flow and provide you with valuable insights that only they can give. If you think you need someone with vast experience and an expert in the field to help you out with your business, consult with one.

Consistent cash flow for e-commerce success

These are just some of the ways to help your e-commerce business build and maintain enough cash to give you maximum opportunity and flexibility. Without a consistent flow of money, your profits will be rendered meaningless.

If you fail to exercise good cash flow management, you risk ending up borrowing more cash than you can pay off to keep your business running. You'll know that your business is growing when you're bringing in more money than you can spend and when you have a stockpile within easy access. When you put in motion the tips above, your business can grow and survive times of financial instability.