Did you know poor cash flow management is the reason 82 percent of small businesses fail? As it turns out, even the most organized sellers experience cash flow problems at one time or another.
Whether you’re a new or established seller, cash flow issues are bound to arise – expanding too quickly, high expenses, disorganized bookkeeping, and the list goes on. When it comes to selling in the marketplace, maintaining a steady cash flow is vital to the long-term growth and success of your Amazon business.
This is why it’s important to be one step ahead. Here are five tips to reduce cash flow problems in your Amazon business:
1. Perform a cash flow forecast
To keep track of your cash inflow and outflow, create a list of your income and estimated expenses. This will help you prepare your budget accordingly.
Take a look at your sales projections. What months do you anticipate fluctuations? Every industry has a busy and slow season, so it’s important to take note of when you expect cash shortages.
Most importantly, remember there will always be unplanned expenditures and dips in sales. Figure out the minimum balance you will need to protect yourself against a downturn.
2. Be smart about your inventory
The majority of retailers’ assets are tied up in inventory, which is why an effective inventory management system is key.
Which products are your best sellers? Rather than buying more of what isn’t selling, stock up on the items you know will provide a good return on your investment. Over time you will notice selling trends, which will help you in determining the right balance of stock.
The last thing you want is to lose a sale because you didn’t have enough product to fill an order. Backorders will cause you to not only lose money and customers, but it will also lower your seller ranking.
3. Use an efficient operations management system
If you’re looking to scale quickly, you will need to organize your finances and streamline your internal operations system. One way to do this is by setting up a global currency account.
By getting local currency accounts to collect your global revenue, this allows you to save significantly on transaction fees and margins when bringing your money home from international marketplaces. There’s no need to deal with the headache of exchange rates and bank fees chipping away at your hard-earned money.
Also, be sure to keep your accounts, balances and transfers in one place. This not only lowers the risk of budgeting miscalculations, but it’s extremely helpful if you’re considering taking out a loan. Lenders look favorably on sellers who are organized and have all of their information in one place.
4. Expand your sales funnel
Marketplace sellers are all too familiar with the cash flow problems caused by the time lag between when sales happen and getting paid by Amazon. Even if you’re on top of your inventory and shipping, this two-week lag can lead to missed sales, a lower amazon rank, and late payment fees.
Since there’s no way to speed up the process, the most practical solution is to have multiple sales channels outside of Amazon. One option is selling on your own e-commerce site so you can create your own payment terms and establish a faster pay cycle.
5. Look into your financing options
If you’re experiencing cash flow gaps, you may want to consider external financing to give you the flexibility and freedom to explore new ways to grow your business.
Many companies fail by not having sufficient operating funds. As your business grows, your expenses will go up – and since expenses often come before the sale, it’s important to have cash in advance.
In terms of funding options, we define our loan proposals using a unique proprietary algorithm to find solutions that meet your business needs.
Check here for your pre-approval amount. If you’re interested, just apply and once approved, SellersFunding will send you funds in just two to three business days.
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