What is ecommerce cash flow?
In ecommerce, cash flow is everything. If you don’t have good cash flow, you will be unable to restock your products, add new product lines, meet demand and grow your business. When all your money is tied up in inventory, it leaves you stuck and unable to move forward until your next cash injection.
Whilst traditional retailers get paid for their products at the point of sale, and can generally not experience a cash flow gap, ecommerce sellers, particularly on marketplaces, spend their cash on inventory, make a sale and then have to wait for that cash to be paid to them by their marketplace – this can be anywhere from a few days to a couple of months. Most businesses couldn’t sustain this way of working, which is why they turn to financing solutions to help bridge the gap.
Five ways you can improve your cash flow
- Shorten your cash cycle
One of the main ways you can improve your cash flow is to reduce the length of time between purchasing inventory and getting paid for your sale. By getting paid faster you shorten your cash cycle and therefore increase your cash flow. You can read more about the benefits of a shorter cash cycle here.
2. Optimise your inventory
Another key way is to improve your inventory management. Your stock is essentially tied-up cash until you have sold it, so a better understanding of what you have and need is key. Benefits of optimising your inventory:
- Increased sales and customer loyalty if you always have products in demand in stock.
- Shorter lead times – which shortens your cash cycle overall.
- You’re only carrying what you really need = lower storage costs.
- A lean inventory will allow you to quickly respond to trending products and changes in the market.
- Increased inventory turnover, avoiding stock sitting around for too long.
3. Negotiate with your suppliers
Build good relationships with your suppliers so you can ask for better payment terms. An extra few days or weeks can make a big difference to your cash flow.
4. Plan ahead
Most businesses have sales that fluctuate throughout the year. By forecasting you can identify potential shortages in cash ahead of time, and set aside surpluses for quieter periods and for when any large overheads may come up.
5. Diversify
Maybe you already have a diverse product line, but have you thought about diversifying your sales channels? Are you reaching as many customers as you can?
The Storfund service is available on marketplaces across the globe and we’ve helped clients expand to other marketplaces. In addition to 18 Amazon marketplaces and all 9 Amazon Renewed platforms, you can find us on all these marketplaces.
By expanding to other marketplaces you could benefit from:
- More competitive commission fees
- Ability to build a more robust business and grow your brand
- Less competition
Good cash flow is key to the growth of a business. Whether that’s growing your profits, product lines, or customer base.
Storfund helps businesses increase cash flow and at the same time grow at pace, because you are only receiving money advanced to you on what you have already sold.
