Starting and running an online business is exciting, but it also has its overwhelming challenges along the way. For one, there are many seemingly minor elements to look after to make sure everything is going smoothly, such as customers’ accounts, shopping cart system, and the performance of the market.
What can be even more terrifying is that a small mistake can cause a significant financial loss for your e-commerce business, even if you have been turning a profit. Staying on top of things when it comes to the cash department can be tough, but you have to ensure you maintain a positive cash flow to keep your online business afloat.
In this article, we will share four smart tips to help you keep a positive cash flow for your business:
1. Create a plan for your cash flow
Before anything else, it is vital that you set a solid plan in place. This is the most essential step to ensure that there’s more money coming in than going out. Additionally, planning everything out from the beginning saves you from unpleasant surprises like debts and unforeseen costs.
Laying down your income and expenses allows you to respond to your situation wisely, like taking out a small business loan, paying your invoices at the most advantageous time, or saving for the next month’s payroll in advance.
2. Rework your expenses
After establishing a solid plan for your cash flow, you have to reevaluate your disbursements and expenditures regularly. Doing this allows you to cut unnecessary expenses and reallocate these funds or resources to something more urgent.
Moreover, a routine reevaluation of your expenses also lets you distribute your finances to efforts that actually boost your sales and increase your income, consequently optimising your operations. If you do not have sufficient in-house personnel to look after this task, you can always lay it in the hands of an expert e-commerce accountant.
3. Have a regular inventory check
Another strategy you can use to sustain a positive cash flow is to conduct a regular scan of your inventory. For products or services that don’t seem to be performing well, it may be a smart decision to put them at discounted prices or liquidate them altogether. Additionally, regular inventory checks let you know which categories sell more and which don’t, giving you an idea of where to invest more of your time and resources into.
4. Change your prices, if necessary
Setting the price of your product or service is not an easy task because the price you set affects your cash flow directly. After all, you have to consider the labour costs, operating expenses, and return on the capital, among others. At the same time, you also have to strike the right balance and not price an item too high.
This is why you have to set a competitive price that still reflects your hard work. Watch out for opportunities where you can raise your prices to bring in more money. On the other hand, if you need to reduce your prices, make sure to conduct a thorough analysis and preparation so that you won’t hurt your cash flow.
Amidst the disorder and commotion that is caused by the pandemic, it’s essential that you keep your e-commerce business’s accounting organised at all times. After all, this is what will sustain your business growth and allow you to employ your staff. Consider these tips mentioned above and consult expert advise to ensure that your business comes out of this global predicament unscathed and healthy!
If you need the expertise of an accountant for online businesses, we’re here to help you out! Our team of skilled accountants will be more than happy to help your business prosper and grow. Get in touch with us today to see how we can help!