‘Cash is king’ because it keeps businesses going.It pays your bills, it sustains your staff, and most importantly, it is the means to make more money.This is the reason you need to have sufficient cash flowing in your business.
How to increase cash flow in a business? In e-commerce businesses, the problem of cash flow is not unusual since there is a constant need to invest in inventory.In fact, many small businesses struggle with the lack of emergency fund and end up failing despite being profitable.
With this in mind, here are nine ways e-commerce businesses can optimise cash flow management
1Don’t Wait Too Long to Get Paid
The rule number one of cash flow management is to shorten the time between making a business expense and getting paid
If your business is based on physical products, keeping it on the shelf for too long will only add to the costs – for example, storage costsMoreover, if your products have expiry dates, the chances of a disrupted cash flow increase even furtherTo avoid this, stock only as per the expected demandMake the big orders carefullyDo not over-invest even if you are in the position to do so
The same goes for digital productsYou may be tempted to launch a big Facebook campaign or revamp your e-store
But ask yourself if such investments will give you any returns soonIf not, then maybe you need to avoid them
2
Align Expenses With the Revenue Pattern
It is a bad sign for your business if there comes a need to take money from the emergency fund to keep it runningTo avoid that, align the major purchases or expenses in a year with the revenueFor example, if you know that most of your payments come in towards the end of the year, plan your expenses and purchases around that time
This way, you will be able to invest using the revenue and will not have to pay out of your pocket
Another important thing to note when answering how to increase cash flow in a business is that most vendors have a 60-to-90 day payment periodSo, wait to make the payments if you have time
Moreover, if you have good relationships with vendors, ask them if they can give you some extra time to pay
3Forecast Your Cash Flow
Ecommerce businesses are not just about selling
Every business involves taking care of everything, including tax payments, wages, salaries, loan repayments, and other overhead expenses
And if you do not know when and how much cash is coming in, it becomes almost impossible to sustain business growthSo, forecast your cash flow and plan each of the business expenses accordingly
4Clear Out Your Inventory
How to increase cash flow in a business with an unrestricted flow of cash? it is important that your inventory doesn’t hold up significant capital
So, check your inventory and sell the stock that you don’t needYou can use some strategies to raise cash faster, including liquidating excess inventory
There are many online marketplaces that you can sell on in addition to your website, the most renowned being Amazon
You can also approach liquidation companies to clear out the excess stock
Moreover, if you have slow-moving inventory, you can use it to increase sales – for example, you can set a buying threshold and give the items as gifts to your customers on achieving that threshold
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5Run Promotions
Focus on boosting cash flow in the short term is an important answer to how to increase cash flow in a business
For this, you can run promotions and encourage sales
For physical products, you can do a classic sale with the focus not on the profit but on generating a steady cash flow
For digital products, you can create early-bird offers or give discounts on new signupsEven if your profit margins are not huge, you will be able to regulate cash flow and attract new customers at the same time
6
Increase Your Average Order Value
Suppose that the average order amount in your business is $60
Now you need to figure out ways to bump it up to $75 or moreIncreasing the average order value for physical products is easier; you can set up a minimum order value for free shipping orders
For digital products, you can encourage your customers to upgrade to premium plansYou can hire dedicated professionals for this job or train your marketing professionals to upsell
7
Reduce Unnecessary Business Overheads
It goes without saying that reducing the balance against the cash coming in helps tremendously in cash flow managementSo, assess your overheads and create a plan of how you can minimise cash outflow and save money
Make sure to review your utility costs, advertising costs, and legal fees carefully; these are usually the areas where cost-cutting is easier
8Optimize Invoice Management
Businesses that focus on selling and not on invoice management often end up with inconsistent cash flows
The problems may include errors in invoice development, payments coming in late, etc
Here are some pointers on how to increase cash flow in a business by avoiding invoice-related problems:
Use a reliable invoice management tool for error-free invoices
Send invoices as soon as orders are placed
Consider charging late payment fees to customers
Small changes like these will help you receive your money on time
9
Accept Credit Card Payments
By accepting credit card payments, you can enjoy possible benefits, such as cashback, grace period, etcIt will certainly ramp up your cash flow
Moreover, it would be easier for your customers to pay using credit cards, which means no delay in payments and a faster cash inflow for your e-commerce business
Be it an e-commerce business or a small departmental store, an adequate amount of cash at all times is necessary to stay flexible and maximise opportunities for the businessWhile established companies set aside cash for emergencies, small business owners look for ways to fund their businesses through loans or online chit fund platformsThe purpose remains the same – to have the reassurance that they would not have to struggle for money to keep the business running
Reevaluate your e-commerce business and use the tips above to maintain a stable cash stream
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Author Bio:
Aatish Khanna works with the Content Marketing team at Money Club – a digital chit fund platform that makes saving, borrowing, and investing your money more efficiently
He writes on topics to help his readers understand processes so they can make better financial decisionsHe’s the go-to person that his family, friends, and colleagues turn to for all their money mattersHe loves to play board games and aspires to one day build his one finance-related board game and app
