5 Things E-commerce Brands Must Do to Ensure Good Cash Flow

All types of businesses have to deal with cash flow. While it's advantageous for all organisations to have cash on hand, but if your bank account is littered with debts and forgotten operating costs, you're still working in the red. A startup trying to turn a profit relies on robust cash flow. Fortunately, you can learn proper money management; here are five things that could help you start.


Always have a cash flow budget


Track the money you have, the amount you owe, and what others owe you. Do this daily so that you can keep accurate records. Forecasts mean nothing if you cannot base them on precise figures. Using e-commerce accounting software enables you to keep accurate books, which will help you make good forecasts.


You could also get a specialist to help you set up a system for tracking bills, receivables, and sales. Then, make an effort to learn how to analyse the output. Don't rely on external solutions; you must know how to read your business' figures as well.


Don't consider profits as cash


If you want your business to stay in the green, you should focus on cash flow instead of profit. Don't rely on the money you have on hand; it is not a good indicator of the longevity of your business. You might have a considerable amount of gross profits but have negative cash flow. If you deduct the operating expenses, amortisation, and interest, you might not have enough resources left over.


Help your cash flow by cutting on costs


When you have a budget, you will quickly see where your money goes. It becomes easy to track if you spend too much time on utilities, rent, office supplies, or some other thing. Do you have a good return on investment, or are you wasting resources that aren't earning back your money?


Cost-cutting also applies to inventory management, especially for companies based around online sales. You must consider your inventory turnover. Hire an e-commerce accountant and figure out the best strategy to move stocks in your case.


Mind your average order value


Strive to get each customer to make high-value purchases. Doing this is challenging; you need to understand them very well and know their spending habits. Perhaps they tend to buy related items; if so, bundling things or creating packages makes sense. 


Maybe they like freebies—you could run a promo that offers free shipping when they reach a certain amount. Target markets have unique preferences, so the only thing to do is to keep trying to make it work.


Always keep in touch with suppliers


Help your suppliers and develop good working relationships with them to help you save on costs. Check if they're flexible with payments, and pay them when it is right for your cash flow. Paying suppliers with a business credit card will also be advantageous; it lets you add two more weeks to your repayment term. Comparing suppliers and maintaining multiple sources can also help you find the best deals in your area.


Conclusion


Good cash flow is the foundation of long-term business success. Not everyone knows how to keep their money running through the organisation. For some people, the solution is to learn how to budget and allocate resources. For others, it is more convenient to hire someone else or buy software to assist with that.


Get the accounting and bookkeeping help you need to make your business thrive when you team up with The Ecommerce Accountant. We work out of Perth and are accountants for e-commerce businesses, working with startups and influencers on their cash flow forecasting, goal setting, and more. Book a free strategy session today or contact us for inquiries!

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