Whether you already operate an online business from home or plan to launch a new venture this year or next, it’s vital to keep cashflow under control. This is particularly the case with the recession that’s coming due to the economic impacts of the COVID-19 pandemic.
eCommerce businesses do generally cost less to set up and run than physical bricks and mortar stores since you don’t have to outlay so much money on renting premises or staffing a shop all day. However, expenses can still quickly add up. Try the following cashflow management tips to ensure your eCommerce venture stays out of financial trouble.
Track Incomings and Outgoings
You’ll never be able to get on top of cashflow issues if you don’t consistently track incomings and outgoings. You must know your financial position at all times and understand the regular deposits and expenses to factor in each month. Examining income and costs enables you to better plan and to avoid being caught out unexpectedly with a shortfall of cash.
Find Ways to Cut Costs
Your cash flow will get into a mess if you keep spending more money than your business brings in. Help yourself avoid getting into trouble, then, by cutting costs wherever possible. Concentrate on removing big fees from your monthly and annual budget where possible, but also remember that you can make a difference by getting rid of small, regular expenses, too.
When it comes to cost-cutting strategies, consider things such as spending less money on non-essential marketing campaigns that don’t bring in enough of a return on investment, and giving fewer hours to casual staff members at slower times of the year. Speak with your suppliers, too, about getting better deals on products, especially the ones you keep reordering.
You could also try to reduce the dollars you outlay on utilities, office supplies, packaging, and shipping costs. Plus, look for areas where you can utilize technology to save money, such as using apps to handle tasks instead of paying people to do them.
Manage Inventory Carefully
As an eCommerce entrepreneur, one of your biggest drains on cashflow each year is going to be inventory. You require plenty of stock to satisfy demand and keep customers coming back to see what’s new. However, don’t go crazy buying goods for your store. You must manage inventory carefully day, and avoid having too much slow-moving or damaged stock sitting gathering dust.
Get organized by analyzing the performance of every range and product you add to your shop. Determine the bestselling items you should stock up on or extend your range of, and learn what is underperforming. Some retailers leave this work until occasional stocktakes or quarterly reporting, but this is too late. You must watch sales like a hawk to see what’s working. Consider consumer trends that could affect sales, too.
As hard as you try to pick only goods that will fly out the door, the reality is, nothing is guaranteed in retail. Some items won’t generate interest with your clientele or sell as well as you expected. When this happens, be decisive and take steps to move older, outdated, and damaged stock.
For instance, discount goods, do “3 for 2” or similar deals, or offer less popular gear as free giveaways with purchase, or even use them as prizes in competitions. These are all ways of getting the stock out of your warehouse to make room for better sellers. Plus, it frees up cashflow.
When managing your inventory, try to improve your forecasting abilities. Get to know your busy times of the year and speak with suppliers about ways to have the most popular products shipped to you in a hurry if there’s a run on them and you need more stock ASAP. Doing this will help you to maximize sales and keep cash coming into your bank accounts.
It pays, too, to consider pre-selling goods. Rather than always guessing which new goods to introduce, list products on your store as pre-orders. See what interest people have and then buy accordingly, using the funds that the pre-sale brought in for you.
This strategy is a helpful way to test items and manage cashflow at the same time. If things don’t sell well, you can always cancel small customer orders and put your money into other, more popular, inventory.
Many online retailers have to close or sell their ventures each year because of problems with cash flow. Avoid finding yourself in this situation by managing this financial side of the business as proactively and strategically as possible.
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