The chance for an eCommerce store to thrive relies on the business’s ability to lower expenses, increase earnings and foresee trouble before it arrives – in other words, knowing their cash flow. Cash flow is the movement of money in and out of your eCommerce store. A positive cash flow means that you are earning more than you are spending, and as expected, a negative cash flow is the opposite scenario. ECommerce insurance might have you covered for unpredicted setbacks that your business may encounter. Still, without knowing your cash flow, your expenses may run haywire, and your business may perish the consequences. Cash flow strategies help eCommerce sellers improve the management of money entering and leaving their accounts, encouraging a constant state of positive cash flow.
If you have made it through 2022 and are still not confident that you have mastered the art of cash flow management, this article will provide you with key tips on improving your eCommerce cash flow.
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5 Tips on improving your eCommerce cash flow:
Cash flow strategies are essential for eCommerce businesses. Knowing your cash flow results in better management of the money coming in and out of your business, understanding your expenses, and staying fully up to date on your financial situation at any given time.
1. Pay in installments
The option of installments has several benefits to eCommerce sellers. If you have recently opened an eCommerce store, your expenses are likely very high while your revenue is minimal (if at all). The solution: Buy now, pay later. Paying in installments not only offers buyers a better consumer experience buying products that are in stock, but it also eases the burden of forking out large sums of money on inventory on the get-go.
2. Pay-As-You-Sell eCommerce Insurance
Pay-As-You-Sell (PAYS) is another installment payment model aiming to increase business stability and safety. PAYS is an insurance model that enables eCommerce stores to pay per sale they make. As a new or small eCommerce business, you are faced with many challenges. Not only are you struggling to maintain a positive cash flow, but you are also faced with many threats beyond your control. With that being said, the only way to properly confront unpredictable risk is with eCommerce liability insurance; without it, every eCommerce business’s future is questionable. PAYS is a two-birds-one-stone scenario: Not only are eCommerce sellers able to protect themselves from risks such as theft, loss, and damage, but the financial burden is now removed as they pay per item they sell and not the whole amount in advance.
3. Cut back on your expenses
Opening an eCommerce store means you are probably spending a lot of money before seeing any profit. Although the list of expenses may seem endless, from inventory to rent to salaries and even phone plans, we often don’t realize that we are biting off more than we can chew. Although the expenses may sometimes seem minor, they add up and can seriously drain your cash flow. You can easily maintain a positive cash flow by correctly managing your eCommerce store’s expenses. Here are a few tips on how:
- Ask yourself, “Do I really need this?” and cut back on things that aren’t completely necessary
- Track your expenses and identify where you are spending the most. Find out how you can cut back on that expense or whether there are cheaper alternatives.
- Ordering your expenses from most to least important.
If you don’t have the money, wait for a better time to revamp your eCommerce store or start a new campaign. Just like Rome, you can’t build your store in a day.
4. Get rid of extra inventory
If your inventory is stuck and holding up a lot of capital, start making extra efforts to get rid of it. Some strategies to clear out extra inventory include:
- Liquidate your inventory by selling it at the price you purchased it.
- Expand your eCommerce presence and open up another store. For example, if you are selling on Shopify, consider selling on Amazon.
- Create promotions and sell your inventory at a discount price
- Create buying thresholds and offer stuck inventory as “giveaways” if customers reach a certain amount in their purchase.
Old inventory doesn’t only collect dust in your warehouse. Depending on the product, it also may lose value over time, waste your money on storage or lose its quality. In some cases, by getting rid of stuck stock, you can significantly improve the profitability and cash flow of your eCommerce store.
5. Create an eCommerce cash flow forecast
Managing your eCommerce cash flow may seem intimidating and confusing at first, but it is really not that difficult. A cash flow forecast can be easily done on a spreadsheet, making mention of all your expenses and profits over a year. Here are a few of the many benefits of managing your cash flow:
- Predicting your shortfalls – You can predict how much money you have available when you need to pay rent, run a promotion or make a new shipment. If you anticipate a more difficult period, you can prepare yourself accordingly by requesting a delay in payment or holding off with your next shipment.
- Less stress – By knowing your expenses ahead of time, you will not be caught off guard by a bill you forgot to pay or a license you need to renew.
- Better budgeting – Cash flow management gives you an accurate picture of your current financial state at any given moment, allowing you to cut back on your expenses in certain months or give yourself more freedom in others.
It doesn’t matter your product, which platform you sell on, or how long you’ve been around. Your eCommerce growth is very limited if you’re not following your cash flow.
eCommerce cash flow management - to wrap it up
“Cash is king” is a familiar phrase business owners use that recognizes the importance of cash flow and its management. Businesses that aren’t on top of their cash flow can simply not move forward. Your eCommerce decision-making, problem-solving, and overall success will significantly improve by improving your cash flow. Unfortunately, not all eCommerce woes come from not planning ahead, but also may be a result of unforeseen setbacks. To guarantee your eCommerce store a brighter future, cash flow management alone isn’t always enough but requires eCommerce liability insurance. To learn more about how you can manage your business in the safest way possible, get in touch with Spott’s insurance experts today.