The rise of ecommerce over the last couple of decades has seen a massive democratization of the buying and selling process. It has allowed for the creation of new businesses without the startup costs that would have been necessary in the past. There is no need to have a physical outlet, only an internet connection. Furthermore, ecommerce has allowed much bigger markets to be reached without the need to spend an excessive amount on physical advertising. Truly, ecommerce has opened up the business world to almost anybody.
Nevertheless, this democratization has not completely evened out the field. If there is one thing which still disproportionately affects the smaller ecommerce businesses, it is cash flow problems. There are several reasons for this. For one thing, smaller ecommerce ventures naturally have access to significantly less reserve capital, which means that cash flow problems can soon arise when either payments are missed or projected client acquisitions do not materialize. FastFACTR, a company specializing in invoice factoring for small businesses, say that their services have been all but vital for the very survival of certain small businesses.
Nonetheless, the ultimate goal is do something about your in-house cash flow and not to become overly dependent on such services.
Anticipation and Action
One of the best strategies is to learn how to anticipate cash flow problems before these actually occur. For small businesses, this is one of the most common problems, and therefore there has been a good deal of advice, tips, and solutions built up over the years because of it. We can certainly learn from those who has gone before and, therefore, it is possible to be able not only to anticipate oncoming cash flow issues but to do something about them as well.
Tips for Managing Cash Flow
So, here then follows some useful tips for managing cash flow as a small business:
Naturally, declining sales – whether that be on account of inflation, inventory changes, or simply clients or customers leaving – is sure to cause a cash flow problem before too long. This is simply because you will attempt to maintain the same inventory with fewer sales. The trick is to constantly analyze the trends at work and compare your company’s performance to previous years. Get as much data as possible and be sure to analyze it in light of wider market trends. Then you can start making provisions for an oncoming cash flow problem.
Lack of Cost Control
There are far too many reasons why your costs could be increasing to give a list here, but one of the more important things to bear in mind is how you can deal with them. Costs can creep up on you, especially when they are increasing only incrementally – perhaps in line with inflation. This can, in time, begin to cause serious cash flow issues. A good plan is to be constantly comparing budgeted expenditure to actual expenditure, on a monthly basis if possible. That way, you will know you have a potential problem on your hands before it grows too large.
The great thing about invoice factoring is that it is determined in terms of incoming income, guaranteed with an existing invoice. Other forms of borrowing are not always based on such a sure repayment. Accordingly, you should be wary of this, especially as a small business. Borrowing now could mean cash flow problems down the line.
Ultimately, cash flow is one of the biggest concerns for small businesses everywhere. That is a well-known fact, so it is up to you to act appropriately. You are not alone here.