Cash Conscious: E-Commerce - Part 1
Updated: Jan 21
Welcome to the very first Cash Conscious! Each addition will explore a pain point related to cash flow.
Cash flow management is critical to any business' success and growth. You may have a profitable business, but if your customers pay you later than when you purchase your inputs, the simple math does not work.
Good thing that there are options to address this problem when caught early.
This first series will look at cash flow pain points within the E-commerce industry.
I recently spent some time working with an E-commerce company and loved integrating the various technology pieces. There is an opportunity to be highly efficient by reducing manual input.
My motto is data flow, not data entry.
E-commerce, you get me.
In addition to my interest, the e-commerce industry can benefit significantly from cash flow planning and management.
One of my friends in the industry is always concerned about stocking out. If this happens, you miss out on sales and the margin you would earn from them.
Proper inventory management is the solution to the stock-out problem.
However, it is just one piece. Without a cash flow plan to support your inventory management plan, there is a real risk of being unable to pay your supplier bills.
Ok, we need a cash flow plan, but how do we get there? Let's dive into pain point 1 that we need to address to set our planning up for success.
Pain Point 1 - Incorrect and Out of Date Financial Information
The fix? Correct and Timely Bookkeeping!
It is imperative to successful cash flow management that your bookkeeping is done correctly and in a timely fashion.
What is timely? I recommend weekly cash flow planning, so the bookkeeping cadence must be at least weekly to support this.
Cash flow projections look forward from your current position. The future is relatively unknown, so forecasts will never be exact. Give yourself the best starting point by ensuring the information available today is correct and up-to-date.
Thankfully, technology makes keeping your books easy. With today's software, you can achieve a paperless environment, setting you up for serious data flow opportunities.
Ok, so what technologies are these?
1. Cloud-based accounting software (Xero or QuickBooks Online).
2. Document management software (Hubdoc or Dext).
3. E-commerce bookkeeping automation tool (A2X).
These three technologies integrate and make bookkeeping a breeze. The next question is, who will be responsible for this duty?
The answer depends on the size of your business and your available resources. Often this falls on the owner's shoulders, but you may already have a bookkeeper or have the resources to hire one.
Cash flow planning is critical to decision-making in your e-commerce business. It goes hand in hand with your inventory management and ensures your business maximizes the utility of its resources.
Correct and timely bookkeeping will drive a successful cash flow plan and set your business up for success!
About the Author
Nick is a cash management specialist in the e-commerce industry. He helps business owners eliminate uncertainty by developing efficient cash flow management systems. Contact him at 250-885-3088 or firstname.lastname@example.org to reduce your cash stress.