There’s arguably never been a better time to run an eCommerce business. People are increasingly predominantly surfing online to find the products and services they need. This trend is expected to continue, with the global B2C ecommerce market likely to reach $9 trillion by 2032, according to Shopify.

But to tap into this growth, you first need a healthy cash flow. Don’t panic if you’re unsure where to start, this article is here to help. We’ll explore nine different ways you can boost your business’s cash flow.

First things first, though…

Why is cash flow important for eCommerce success?

Cash flow is the movement of money in and out of your eCommerce business during a certain period. If the money coming into your business is higher than the money going out, you have a positive cash flow. If the opposite is the case, you have a negative cash flow. To maintain a profitable business, you should always aim for a positive flow.

Of course, for eCommerce businesses, this is often easier said than done. Some factors can be controlled easily. Staff salaries, rent, and other factors will roughly stay the same. But unpredictable customer behavior, supply chain issues, and market fluctuations all present potential hurdles.

To achieve eCommerce success, you need to leverage real-time cash flow management. This way, you can adapt and change your approach when needed.

How to improve cash flow for your business

There’s no denying the importance of maintaining a healthy cash flow. Here are some tips to help you maintain a positive flow.

1. Optimize your pricing strategy

The idea of increasing prices is never popular. Some businesses will be nervous to even consider this approach, fearing a backlash from shoppers. But static pricing won’t help you maintain a positive cash flow. The cost of parts, manufacturing, and storage is liable to change. You’ll quickly find your profits start to dwindle if your pricing stays the same.

Conversely, it's also important to know when to reduce prices. Customers won’t invest in your offering if they feel they’re getting a better deal elsewhere.

Instead, embrace a dynamic approach to pricing. This is a strategy that involves using market factors to determine your overall pricing. For example, if there’s a sudden rise in product costs, you’d increase prices. If demand for a product falls during certain periods, you’d reduce prices.

The right pricing strategy can maximize revenue and maintain a consistent cash flow. Make sure you don’t overlook this factor when seeking to improve cash flow.

2. Streamline your inventory management

Inventory management can have a big impact on your cash flow. When handled well, you’ll always have appropriate levels of stock when needed. When handled badly, you could either suffer from shortages or have too much stock. In that case, you're cut off from making sales or using valuable storage space on products you can’t shift.

To avoid these scenarios, streamline inventory management with some of the following tactics:

• Carry out demand planning: Demand planning helps forecast future customer demand for products. This involves using tools that look at current and historical data to predict future patterns. This way, you can make sure you have the correct levels of stock to meet demand.
• Monitor supplier performance: You’re reliant on suppliers to deliver products at the correct time and in the right volume. Monitor supplier performance closely to assess their reliability and the quality of the products they deliver. Don’t be afraid to switch suppliers if they underperform.
• Have ‘safety stock’: Safety stock is an extra quantity of products ordered to help avoid selling out. You’ll be prepared if there’s a sudden spike in orders for a certain item.

3. Improve your accounts receivable process

Accounts receivable (AR) is any money that your customers owe your business. This could include delayed product payments or subscription fees.

Making the AR process more efficient is an easy way of improving cash flow. You’ll avoid missed payments and make sure money is sent on time. With that in mind, here are some of the ways eCommerce businesses can improve AR.

• Switch to digital invoicing: Paper invoices incur extra printing costs and are at risk of being lost in the post. A digital invoice is free and is emailed to a customer as soon as their order is confirmed.
• Automate key processes: Many AR processes are repetitive and can be automated. Tools can automate invoice processing, send payment reminders, and handle many other repetitive tasks. You can free up staff to handle more valuable tasks and reduce mistakes.
• Chase late payments: Without proper care, it's easy for late payments to go under the radar. Make sure you have systems in place to notify you as soon as a payment is overdue.

4. Reduce operational costs

Whether it's running your website, managing your marketing budget, or hiring staff, there are a lot of operational costs involved in managing an eCommerce business. Cutting down on these can help towards a positive cash flow. Consider some of the options listed below.

• Switch to dropshipping: Dropshipping involves working with third-party suppliers who house and deliver items to customers (for a cut). You won’t have the added costs of managing and maintaining an inventory.
• Use less packaging: Too much packaging can be expensive and sends the wrong message to eco-minded customers. Where possible, find ways to reduce bulk (while still providing enough protection to products).
• Cut out poor-performing marketing channels: There’s no use spending money on marketing that doesn’t deliver results. Use analytics tools to weed out poor-performing channels.

5. Diversify revenue streams

There are plenty of ways eCommerce businesses can make money other than selling products. To improve your cash flow, think of ways to bring in revenue.

For instance, you could carry out affiliate marketing, where you advertise the products or services of other brands in your store. When a customer clicks a link and buys a product, you’ll get a cut; it’s a win-win for both businesses. If you go down this route, pick a relevant partner whose offering is likely to interest your audience, but isn’t a competitor.

Another option is to introduce a subscription service to your store. Here, you could give loyal customers a discount for regular deliveries of the products they buy most. You could also offer samples of new items to subscribers to introduce them to new products they might enjoy.  

6. Negotiate with suppliers for better terms

The wrong supplier deals can have lots of negative impacts on your cash flow. Luckily, after enough clever persuasion and negotiation, suppliers may offer you better terms.

Begin by building the strongest possible relationship with your supplier. This requires research into their business, its stakeholders, and any challenges it faces. Open as many communication channels as possible to create regular dialogue.

When negotiating, try to discuss all options available. Even if a supplier isn’t willing to negotiate payment terms, they may be flexible in other areas, such as extending payment terms. Remember, you can always walk away if a deal doesn’t work for you.    

7. Offer multiple payment options

Customers look for platforms that provide the maximum amount of flexibility. If shoppers can only pay via their debit or credit card, they go elsewhere. Instead, offer multiple methods of payment such as Google Pay, PayPal, or Apple Pay. The easiest way to do so is to use a payment gateway that offers multiple payment options.  

Alongside offering a variety of payment methods, consider options for staggered payments. You could allow buyers to purchase a product over the course of months or a year.

Ultimately, by offering more varied payment options, you open the door to more sales.

8. Manage chargebacks effectively

Chargebacks can seriously disrupt your cash flow. Unlike standard refunds, chargebacks are initiated by the customer’s bank, reversing the payment without your involvement. This results in lost revenue and may lead to added fees and penalties if they occur too often.

To reduce chargebacks, use fraud detection tools that catch suspicious transactions before they’re completed. Keep detailed records of orders, shipping, and customer communication to support your case when disputes arise. Dedicated chargeback management tools help flag high-risk transactions and recover funds, giving eCommerce businesses more predictable, stable cash flow..

Taking a proactive approach to chargeback processing protects your revenue and helps maintain a healthy, predictable cash flow. That's especially vital since friendly fraud is one of the main sources of cash flow hiccups for small businesses.

9. Monitor and manage cash flow regularly

Are you maintaining a healthy cash flow? The only way of knowing is through regular monitoring. The right retail software can give you constant oversight over your cash flow. This includes a comprehensive set of KPIs to monitor your progress and instant, predictive analytics that enable data-driven decision-making.

Be sure to alter your tactics as you track your cash flow. If a certain tactic isn’t bringing the results you need, change it. By constantly adapting to the data, you can maintain a positive cash flow more easily.  

Final thoughts

A positive cash flow is essential for keeping your eCommerce business on track. But when dealing with an uncertain market and unpredictable customers, achieving this goal is tricky. We’ve shared nine simple tips to get your cash flow on track. Maximize profitability by optimizing pricing strategies, streamlining inventory management, and enhancing accounts receivable processes. Minimize overhead costs, diversify revenue streams, and negotiate favorable supplier terms. Boost customer convenience with multiple payment options, automate chargeback processes, and monitor cash flow with precision. Why not try putting these into action?