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Aug 22

9 Strategies for Increasing Cash Flow in Your Ecommerce Business

Reading Time: 6 mins

The ecommerce sector is one of the trickiest around. The lack of physical stores takes away a lot of the responsibilities and expenses, but selling online still comes with its set of challenges. Since there are endless options for marketing and selling in the ecommerce world, it can be tricky to figure out how to allocate your funds or how to boost your cash flow

Even though these challenges exist, online businesses are extremely popular nowadays. During the pandemic, this is the sector that helped many organisations survive on the market. Research by Gartner shows that 87% of senior business leaders think of moving their business online.

It’s not an opportunity you should miss out on, but how do you handle the finances?

If you have negative cash flow and haven’t figured out how to backup your business with savings and alternative gains, you’ve come to the right place. In this article, you’ll find 9 useful ecommerce tips that will optimise your cash flow.

1. Get an ecommerce credit card with flexible limits

As a business that operates online, you’ll surely have many expenses. Many of these happen online, too, so you will need an accepted method. What better option than a Visa card, seeing how this card provider is the most widely accepted in the world?

In February of 2022, Juni, a financial company for ecommerce entrepreneurs, launched an ecommerce credit card, the first of its kind. If you are eligible for this card, you have the opportunity to expand and grow with a payment option tailored to the needs of this sector.

How does this work?

The Juni visa card is interest-free and has highly flexible limits. It’s made for media buying, which takes away the restrictions that come with traditional credit cards. On top of that, you can benefit from the 1% cashback of all spending which, in this business world, can make for quite a significant amount. 

2. Systemise the revenue by integrating payment processors

You’ve worked hard to start your ecommerce business and it’s already enjoying some success. If you have several ecommerce platforms, this is definitely a strategy you should consider. Simply put, if you want to optimise your finances and increase the cash flow, you need to find a way to systemise the revenue. 

Businesses that use different platforms pay a variety of fees for using different payment processors. Take, for example, Etsy or Amazon. Let’s say that you sell products and accept payments in PayPal or Visa on these platforms. Both platforms charge a different percentage for transferring the payments, which can be a real hurdle when you need to put this data in your business’ books. 

The good news is that you don’t have to do this manually. If you use smart accounting software, this will all be automated and you can connect different payment processors for your business. The information will be funneled into one location, and you can minimise the mistakes and unnecessary expenses that come with them.

3. Find the unnecessary in your expenditures

If you don’t look closely at the expenditures of your business, the chances of figuring out what costs are unnecessary are slim to none. These might seem irrelevant, but they can add up to a small fortune – especially in the long run. 

If you want to increase the cash flow, you need to start by eliminating unnecessary cash losses. It is time to limit the needless costs for your business, so examine all your monthly expenses at least a few times every year and eliminate the things you can do without. 

Are you investing in ads that aren’t reaching any audience?

Are you paying for software that your team hardly ever uses?

Do you have to advertise your online business on every social channel?

Is there a cheaper, quality alternative for the tool you are using? 

Check things like your marketing payments or utility expenses in detail. Such sectors are most likely to result in the biggest savings. Ideally, you should do a monthly cash flow analysis so that you are constantly up to date with what your business is spending money on.

4. Make use of that unused cash

This refers to the money that loses value and is not making any profit for your business. Instead of keeping money, you can put it to better use by paying off your debt faster. This will improve your credit score and give you the strength to survive tough periods, such as the recent pandemic. 

You can also use it to invest in new industries and sectors, but make sure to do your due diligence and research your options first. And, of course, you could use it to improve the quality of your product or your services by investing it in your employees or the equipment they use. 

5. Align your expenses with the revenue

All business people are devastated when they have to turn to the emergency fund just to survive on the market. It looks like the ending of the business is coming near, which can cause frustration and result in making bad decisions. 

While you cannot anticipate when this will happen or avoid it with certainty, there are some ways to make your ecommerce store stronger. This is one of them. 

If you want to avoid spending your emergency fund, you should align your big expenses and purchases with the revenue, at least once a year. 

Most of the business’ expenses occur yearly, such as subscriptions to SaaS tools, bonuses for employees, and more. If you have a set period when this all happens, use that time to do this. This way, you’ll collect the revenue and be able to pay it all off at the same time, which will also fit well with keeping your relationship with brands whose services you are using. 

6. Manage the invoices properly

Focusing on selling is important in any business, but if you put all of your focus on this, you won’t handle the rest of the things that determine your cash flows. Selling your products and services isn’t the only relevant thing for your finances. 

You need to also consider invoice management. If you don’t have an optimised invoice management process, you’ll often have inconsistent cash flows. The results are delayed payments, errors in developing invoices, etc. 

There are solutions to many of these problems. For example, if your customers aren’t paying their invoices on time, you can consider charging fees for late payments. 

One very smart thing to invest in is an invoice management tool. Find one that fits your business and use it to automate the creation, implementation, and payment of invoices. Such a tool will remind you and customers that an invoice is due, and give you accurate reports to minimise mistakes. 

7. Lease, don’t buy

Of course, this is not always an option. If it is, you should definitely consider it. Instead of making costly investments to buy just about everything you need for your business, try leasing instead. 

You can lease equipment, real estate, vehicles, etc. It is great to have the funds to make a purchase since it saves your business money in the long run. However, if you invest all you have to buy everything you need, you won’t have the financial strength you need to survive the difficult periods that might come. 

This is also a very smart move if you are unsure of what to invest in. It gives you the chance to see if you’d benefit from the equipment you are considering, or if you should invest in something else. 

8. Find a way to make clients pay on time

The delayed payment fee is just one way to encourage clients to pay on schedule. Many ecommerce businesses fail because when they allow clients some time to pay for their services, they get their payments delayed as a thank-you. 

This can seriously jeopardise a business’s cash flow, especially if it happens often. To speed things up, send out reminders, allow customers to pay in installments, and consider using payment automation. 

9. Stay in touch with marketing trends and practices

In an ecommerce business, marketing is one of the biggest expenses. This is also the best source of cash flow since it helps you widen your reach and attract more people to your business. 

If you want to make it even more effective for your ecommerce store, you should track marketing trends and practices and make smarter investments. 

By doing so, you can cancel campaigns and initiatives on platforms and portals that aren’t giving you any results. It usually takes months for businesses to uncover a site or campaign that isn’t working well, in which time they will lose a lot of money. 

If you keep track of the trends and stay tuned with the best marketing practices, you can avoid such expenses. This will also show you the opportunities for wider reach and recognition i.e. tell you what you should be investing your money in. 

Ready to make some smart cash moves?

Improving your cash flow is not something that can be done overnight – and it is not easy, either. You are in the virtual marketplace, which makes your spending different than traditional businesses. If you want to do it right, you should keep these cash flow tactics in mind. 

Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence 

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