A recent poll revealed that 87% of senior business leaders think that their businesses need to move online to succeed. Thisis not to say that traditional brick-and-mortar outlets have no place, but merely that ecommerce is something very worth getting in on – if only to keep up with the competition. You can look at this way – there are far more traditional retail outlets feeling the need to move online than there are purely ecommerce ventures that experience a pressing need to open a physical outlet.
Moving online provides businesses with countless opportunities to grow. From reaching a far more widely dispersed customer base to managing and creating a marketing strategythat can target multiple demographics at once, moving online brings with it many benefits. But it would be wrong to say that this has made business much easier.
Business is never easy, of course, and moving online actually brings with it some fresh challenges not faced by traditional retail. One of these is that cash flow becomes a good deal more complicated. Especially as the business grows and diversifies into multiple sales channels, different payment processors, and multi-currency accounting.
What is Cash Flow?
Cash flow is an issue for all businesses and has always been so. It refers to the amount of available cash over the course a specific period of time. A business will have monthly or yearly profits but, even if these are sufficient to cover costs, that business could still have a cash flow issue if the money to meet every financial obligation is not available at the moment it is required.
Your monthly expenses might be, in total, less than your monthly revenue but that revenue might come in after it is needed, and a mid-month financial obligation might require more funds than are available at the point in the month when it needs to be paid. If this is the case, the business has a cash flow issue, regardless of whether the monthly revenue exceeds the total monthly costs or not.
This is one of the reasons why many ecommerce ventures look into invoice factoring. Factoring service fastFACTR, who say factoring your invoices is extremely important in such situations,would pay the value of an invoice when it comes in, under the understanding that it will be paid back when the money is available. This is a service well worth investing if a company is experiencing cash flow issues.
Cash Flow Tips
Of course, though, the ideal situation is to be able to pay every expense at the point it needs to be paid. Here follows then some tips for managing cash flow as an ecommerce business:
Good Bookkeeping is Essential
When it comes time to prepare financial statements, important data such as products, customers, locations, fees, taxes, and so on need to be readily available. Bookkeeping automation software is often invested in for precisely this reason.
Use a Single Accounting Platform
A single accounting platform can be used even when a business has multiple payment channels. By integrating them, you can get a much clearer idea of total financial obligations and therefore work towards an effective cash flow solution.
Automate Regular Payments
If you know you can meet certain monthly financial obligations because you also have regular payments from certain customers or clients, then you should automate those payments. This way, you can focus only on the cash flow issues arising from payments which are not regular.
For a business to grow, a good cash flow needs to be in place. There is no point making this harder than it needs to be.