CABILLY & CO. BLOG

Keeping Your Cash Flow Moving – A Step-by-Step Guide

cashflow blog article

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While all Amazon sellers are keeping track of profit and revenue metrics, expert e-commerce entrepreneurs recognize that they should also be keeping a close eye on their cash flow. Those high level, attractive numbers can help you keep your eye on the prize, but cash flow will provide a thorough and accurate picture of the current, and future, financial health of your business. And in the constantly evolving world of e-commerce, cash flow is the lifeblood of success. This means that you’ll need strong cash flow circulation to enable sustainable growth for your Amazon business. Streamlined cash flow and efficient management is paramount to long-term scalability, but how do you achieve that? 

Despite its importance, many Amazon sellers don’t understand how to track, manage, and streamline their cash flow. In this blog, we’ll provide a complete overview of cash flow and  how to efficiently manage it for your business. Once you have a complete picture of how money is moving through your business, then we’ll share our step by step guide to keeping cash flow moving to ensure continuous growth. 

Go with the Cash Flow 

Cash flow is the movement of money in and out of your business over a certain period of time. While other metrics view a stagnant data point, from a specific moment time, cash flow is constantly changing due to the fluid nature of money movement. Without proper cash flow management, your e-commerce business can quickly run into financial troubles. For e-commerce sellers, this is especially important because of the unique and ever-changing nature of the marketplace. 

Cash flow troubles are typically caused by two different problems: 

  1. Cash flow “hiccups.” This is when there’s a discrepancy between when capital exits your e-commerce business and when it reenters. For example, cash flow hiccups often occur while Amazon sellers wait for their weekly or biweekly payouts, with the delay causing them to face a cash flow shortage. 
  2. Lack of capital. While this might seem obvious, if your business doesn’t have enough liquid working capital things are going to inevitably come crashing to a halt. Lack of working capital means that you won’t be able to invest in new opportunities, expand processes, or even repurchase inventory quickly. 

To avoid these cash flow problems it’s important to ensure that you have an accurate cash flow forecast available for reference when budgeting, along with strategies implemented to streamline your finances. Let’s take a look first at some of the best ways to forecast in a timely and accurate manner for every shopping season. 

Forecast Calls for Scaling…

Did you know that over 50% of e-commerce sellers track all the data they need for cash flow management in spreadsheets? While that may be effective as a small business, e-commerce sellers who are handling a business with rapid growth or scaling sales can’t afford to spend large amounts of time manually entering data. Additionally, these spreadsheets can create big issues if they aren’t well maintained and frequently updated. 

Worst of all, spreadsheets are entirely reactive. Sellers can track activities that have already happened, but you can’t plan product launches or restocks without a view of your projected future cash flow. That’s why our partners at Viably created a free software that connects directly with your Amazon Seller Central account, bank accounts, and any other accounting software that you might use. In one consolidated dashboard you can view updates to your cash flow automatically, along with using responsive projections to adapt your budget seasonally or to new opportunities for growth. 

Weather Ready: 3 Steps to Keep Cash Flow Moving

Once you’ve established a cash flow forecast for your e-commerce business, it’s time to start optimizing and streamlining your financials to enable sustainable growth. As you build up your cash flow, with access to greater working capital and an expedited cash conversion cycle, you’ll be able to harness new opportunities efficiently and effectively to propel your business to new heights. 

1. Manage Inventory Efficiently

Optimize inventory management to strike a balance between meeting customer demand and tying up excess cash in stock. Implement just-in-time inventory strategies, negotiate favorable payment terms with suppliers, and conduct regular inventory audits to identify slow-moving items and prevent overstocking. 

Efficient inventory management also means keeping a close eye on seasonal and trendy items that your business might carry. Just because a product is selling rapidly this week does not guarantee long-term profitability. By staying aware of your inventory, avoiding stock outs, and optimizing seasonal advantages you can help keep capital liquid for longer. 

2. Negotiate Payment Terms

Negotiate favorable payment terms with suppliers to extend payment deadlines and preserve cash for other business needs. Seek discounts for early payments and explore alternative financing options such as trade credit or supplier financing arrangements. Effective negotiation can significantly enhance cash flow flexibility, as well as potentially offering you a bigger bottom line. 

3. Explore e-commerce Funding Options

Consider various e-commerce funding options to bridge any cash flow gaps that you might run into, as well as fuel business growth. Even if you’re not facing any cash flow challenges immediately, a healthy amount of good debt can help you reach your financial goals for the year by giving you the resources to take advantage of new opportunities. At the same time, you can start building up a strong “Sleep Well at Night” buffer with the assistance of external capital, ensuring that you never see a cash flow negative month again. 

With more options available to e-commerce and Amazon sellers than ever before, it’s important to explore all your options for funding. Viably offers personalized and customizable working capital offers to sellers, with Customer Success representatives available to talk you through every step of the process. 

Optimizing cash flow is essential for e-commerce sellers seeking funding and sustainable growth. By following these steps, you can effectively manage your cash flow, enhance financial stability, and position your business for success in the competitive e-commerce landscape. Remember, proactive cash flow management is key to unlocking growth opportunities needed to propel your e-commerce venture to the next level. 

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