Most businesses primarily care about making money, which is not a wrong goal. However, that is not the whole story. In reality, a company must be most concerned with how much money is coming in and going out. Profits may look appealing on paper. Nevertheless, they do not mean anything if there is insufficient cash to back them up. In a nutshell, a cash flow statement is essential for any business. At all times, companies that are making money have affirmative cash flows. If everything else stays the same, a lot of that cash flow depends on how well you manage it and how closely you pay attention to its details.
Phillip Campbell, the CFO of many companies and “Never Run Out of Cash” book’s author, has said the following about cash flow in brief:
- “Despite the fact that cash is the lifeblood of a business — the fuel that keeps the engine running — most business owners don’t truly have a handle on their cash flow.”
- “Poor cash-flow management is causing more business failures today than ever before.”
Top 5 Ways to Manage Your eCommerce Business’s Cash Flow
1. In-Depth Cash Flow Knowledge
The cash flow statement format is not the same as the profit statement format. Simply put, a business’s profit is its income minus its costs and taxes. When you send a customer a bill, that is revenue. When the customer pays you, that is cash.
You will get your income if you add up the sent invoices for a month. You would also have a good idea of your costs. In addition, you would get the profit if you put costs and profits into the equation. Nevertheless, there is no profit until the full invoice amount is paid.
2. Spend Less and Make More Sales
You should never mix up growth and profitability concepts. The sole growth in the business is when you make more sales. It might seem like “you are growing” if you hire more employees, open more facilities across the country, and buy resources before you require them, but you are not. But what is happening is that you are putting a lot of pressure on the cash flows.
If getting customers is your primary goal, it is harder to make it happen. Although, it may seem like a no-brainer. Hence, you must discover ways to get customers cost-effectively, use every available marketing and sales channel to its fullest, and up-sell/cross-sell to the existing customer base. When you do this, your sales go up. You can increase your cash inflow if you keep your accounts receivable low.
3. Have Credit? Remove or Reduce It!
We, as human nature, always go with the flow. Similarly, businesses do the same. Because 30 or 90-day loan is common in industries does not mean that all companies do it. Instead, businesses tend to take credit as the norm and accept the way things are. If a business has never done that, yours could be the first to do it.
If it is going to happen, then research the customers or clients. You can also do the following:
- Look at the cash flow format report for your clients.
- Find out if your clients can pay you on time.
- What is your client’s financial account?
- Check the sources
- Do online research
- Accept credit cards or other ways to charge your customers.
- Ask for advance payment, even if it is a small part of the aggregate transaction value.
4. Never Use Low Prices or Discounts
Many businesses offer discounts, lower their prices or offer low bids. Even though it is not true that such strategies do not work, they could hurt your objectives of the cash flow statement. Hence, there is no need to sweeten the deal if your services and products are the market’s best. In addition, there is no close second in terms of value.
Depending on what kind of business you have, you might need to make a few changes to the plan. Instead of giving discounts, you could offer discounts to customers who pay upfront or who pay you monthly.
Have you ever heard of or seen an Apple product on sale at the store, even though other products compete with it? It is a question that we are leaving you with to ponder. If you find the answer, you can manage cash flow and opt out of discounts. If you can or can, do not discount anything at all.
5. Use Tech to Back Up Cash Flow
Small businesses can also have problems with cash flow if they do not keep their finances in order. Invoices are lost, cash is collected, cash flow statement analysis are incorrectly calculated, and charges are missed randomly- these are a few examples of the problems most small, medium, and large businesses face. If such companies use the right technology, they can run as smoothly as the best Fortune 500 companies.
The Final Stroke!
NimbusPost, for example, has built-in dashboards, analytics, reporting, and more that can help you better manage the cash flow. It is supported by cloud infrastructure, so you never have to worry about servers or other hardware.
In a nutshell, cloud computing is the best way for your business to save money and time. Using NimbusPost’s advanced logistics technology and advantages like early COD remittance, you can find ways to go global, invoice faster, offer new invoicing ways to customers, set up payment plans, and a lot more.
