Cash flow management for e-commerce success

As for any business, cash flow management is important for e-commerce success. Effective cash flow management can be the difference between the success and failure of a business, and for this reason, it is important to get right.

The e-commerce world is fast-paced so it is crucial you know what money you have coming in and out of the business. With a steady cash flow, you can gain a competitive edge in the market, generate more sales, order more inventory, and build trustworthy relationships with suppliers.

However, if you have poor cash flow management, you may lose sales, damage business relationships, and stunt your e-commerce business growth.

We know that looking at financial statements and balance sheets can be overwhelming and confusing, especially if you do not have a business or accounting background. Not knowing where your money is going, if you will have enough cash to purchase inventory or make a new hire is stressful.

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But don’t worry, this blog will explain what is cash flow, what is cash flow management, and how you can improve your cash flow management to ensure e-commerce success and business growth.

What is cash flow?

Cash flow is the cash that moves into and out of a business. A positive cash flow is when there is more money coming into a business than leaving it each period. A negative cash flow is when a business is spending more money than it makes.

Cash flow is reported using a cash flow statement. This financial statement details how much cash entered and left a business during the given reporting period. This helps e-commerce business owners plan for the future and understand their financial health.

A cash flow statement will mention all outflows and inflows of cash over the reporting period. This includes everything from investments in property, plant, and equipment to employee wages, tax payments, and inventory transactions.

What is cash flow management?

Cash flow management is the process of tracking cash flow. This means tracking the money that comes into a business against outgoings such as rent, utilities, and wages. Effective cash flow management provides a clear overview of costs and ensures a business has enough cash available to pay bills and make a profit.

By understanding the cash flow of your business, you can make accurate forecasts for growth and identify opportunities for investment.

How to improve cash flow management for e-commerce success

If your e-commerce business is currently experiencing a negative cash flow situation or you are looking to improve your cash flow management, you’re in the right place. Although a negative cash flow is not ideal, e-commerce sales often fluctuate meaning you are likely to experience poor cash flow at different points of your business lifecycle.

Thankfully, there are a number of ways you can improve cash flow management to streamline your e-commerce success.

Automate your invoice chasing

Late payments can leave e-commerce businesses vulnerable and without the cash they need to pay overheads such as utility bills, rent, and employee wages. In some cases, late payments can also leave e-commerce stores without cash to purchase inventory to continue trading. In fact, 50,000 businesses are pushed into insolvency each year in the UK as a direct result of late invoice payments.

You can minimise the impact of late payments on your e-commerce business by automating your invoice-chasing process. Automatic invoice reminders mean you no longer have to remember to send manual chaser emails.

Not only will this save you time, but it also means that invoices are likely to be paid more quickly and on-time to help improve your cash flow and cash flow forecast.

Use accounting software

E-commerce stores often deal with multiple currencies, overseas transactions, and other complicated financial information. Accounting software, such as Xero, makes managing your business finances easier and simplifies the process of cash flow management.

Accounting software will automatically calculate what your business is earning, the expenses you need to pay, and how profitable your business is. When utilised, this information can be used to identify the sustainability of your brand.

Outsource to an e-commerce accountant

With industry experience and knowledge, e-commerce accountants can help you properly prepare and provide the e-commerce tools you need to project and manage cash flow. Outsourcing to an e-commerce accountant will not only save you time, money, and resources but will also reduce stress and worry surrounding your business’s financial health.

At Unicorn Accounting, our dedicated team can support and help you by ensuring everything is reconciled and up to date so you can accurately create a cash flow forecast. We offer e-commerce advice, financial management, bookkeeping, cash flow statements, and tax filing services to support and scale your business.

To see how we can help you maximise the scalability of your e-commerce brand all year round, get in touch with Unicorn Accounting today.

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