Having a successful online store goes beyond having strong sales. All businesses have expenses, and even when those expenses are controlled, if they outstrip the timing of your revenue intakes monthly, you could be running in the red. For example, let’s say you must pay upfront for your re-sell products, and also pay your team for admin and labor support. But your own invoices are due Net 30 or Net 60. This means, month after month you are paying out cash before you take cash in. Unless you started the company with a balance sheet in the black to defray this or have savings set aside, you will be just a few late invoices away from disaster. So, how can you fix this cash flow problem?
1. See the Big Picture
Forget the stories of the no-experience, fly-by-the-seat-of-their pants entrepreneurs that strike it rich. There is no flying by the seat of any pants when it comes to real, lasting success. Sure, you can trust your gut and have good intuition, but you also need to stay on top of the cold hard facts – namely, your balance sheet. Know your numbers. Know what is coming out, what is coming in and when. See where the gaps are, be they in expenses exceeding revenue or timing causing you to constantly run in the red. Then you can be proactive about filling the gaps and ensuring steady cash flow.
2. Carefully Consider Credit
Many businesses, especially small businesses, rely on credit as a way to fill those aforementioned gaps. Remember, borrowing money comes at an expense (interest) and must be paid back. So, plan accordingly. If you need to put the payroll on credit because your invoices are Net 60 and your expenses are Net 0, do so, but be sure to pay off the monthly payroll as soon as the invoices are paid. Otherwise you will soon have a hefty interest payment on top of your slow cash flow and expenses.
3. Delay the Start Date
If you have not yet launched your e-commerce venture, strongly consider holding off until you have either saved up some funds or have procured some backers. You can start your business in the red and work towards running in the black, but for any small business, that can take a very long time. Weigh the pros and cons among starting with investors, starting with saved funds, or starting in the red.
4. Invest in Yourself
Invest in yourself and the tools that make cash flow easier. Automated bookkeeping programs like FreshBooks or QuickBooks can take a lot of the guess work out while providing you with monthly reports and other insights. Joining a networking group like Wizards of Ecom can help you understand, from other ecommerce sellers, the ins and out of managing cashflow.
Wizards of Ecom
The largest meetup group of its kind, Wizards of Ecom brings together online sellers at all stages in their career. It is the ultimate place to network and learn the keys to ecommerce success. Founded by one of Amazon’s earliest and most successful sellers, Wizards of Ecom is the place to be when you want to invest in yourself and your brand. Explore what you can learn here.