Whether you are a small business owner or an executive in the higher ranks, you likely understand that it takes strategic preparation and efficient management for a business to boom and then flourish for decades. You also probably know that it takes a while before you regain the capital you invested. A significant amount of time, effort, energy, and resources are poured into these operations.

There is a reason why financial advisors, accountants, and bookkeepers believe that cash is king. In your business operations, the money that comes in and the money that comes out constitute the cashflow. It is the movement of funds in your business.

Studies have shown that most businesses with high profitability can still fail, particularly due to poor financial planning. According to a report by the U.S. Small Business Administration, among 600,000 new small businesses launched every year, only 44 percent manage to survive in the next four years. Inexperience, lack of capital, overinvestment in fixed assets, and poor inventory management have been found to be the cause of bankruptcies.

The key, then, to maintaining and managing a growing company is through a consistent and steady stream of cashflow. Cashflow is the lifeblood that keeps operations going smoothly. It spells the difference between short-term gratuitous profit versus long-term economic sustainability. Learning to maintain a healthy cashflow can ensure that companies can achieve financial objectives while keeping the backend up and running.

Cashflow vs Profit

Early on in your career, you must understand that profit does not automatically equate to cashflow because profit is simply revenue minus expenses. Even if you create cash from invoices, you should also take into account the relationship between the money you receive and the money you spend, and how it will affect business operations.

When it comes to cashflow, some of the financial factors you must consider include:

Accounts receivable

Accounts payable


Salaries and professional fees

Monthly expenses


Office supplies


Capital expenditure

Debt service

To keep your business alive, it is important to keep track of these financial factors. You can do that by monitoring two kinds of cashflow: the first one is positive cashflow, while the second one is negative cashflow.

Positive cashflow occurs when the amount of funds funneled from accounts receivable, sales, etc. is more than the amount of funds that go out through salaries, accounts payable, and monthly expenses.

On the other hand, negative cashflow occurs when the amount of money that goes out is more than the amount of money you receive. The latter is often the reason why most businesses raise the white flag and close.

Strategies to Manage Cashflow Successfully

Maintaining a positive cashflow should be your daily, weekly, and monthly goal. A healthy and positive cashflow ensures that you have money to keep your business running, to pay your suppliers and employees, and to boost production.

In this article, we list the best practices which can help you improve E-commerce business cashflow, manage your spending, improve your margins and profit, and grow your business.

Prepare a cashflow statement and track the movement. The first step is to consistently record the amount of money you receive and the money you spend. If you have a weekly or monthly cashflow statement, it will help you make changes in your spending or your business strategies to ensure that the cashflow remains healthy. This way, you can track how you spend your money. You can intuitively identify upcoming expenditures as well as keep a record of customers’ payment histories.

Have a financial cushion. You can get a business line of credit in case of emergency. Having a business line of credit is a good insurance policy against negative cashflow. It is possible to get a line of credit with your inventory or accounts receivable as collateral.

Maintain control of invoices. Once the products are delivered or the services are completed, you can send the invoices as soon as possible. Direct and easy-to-read invoices are a customer’s best friend. Add areas such as due date, amount due, payment methods, and where to send payment. Instead of mailing invoices, it is now easier to reach people through email. Issue invoices immediately and follow up if payments are slow.

Keep costs under control. Check out your daily, weekly, and monthly expenses. Consider whether you can cut back on rent, payroll, or utilities. Check if you have any subscriptions that you are no longer using, and if you can end them immediately. Be wise about where to spend your money, especially when it comes to new equipment.

Improve receivables. You can increase the speed with which you turn materials into products, inventory into receivables, and receivables into cash. Make sure to get rid of outdated inventory and focus on efficiency. You can provide discounts to customers who complete their payments quickly which will encourage them to pay much earlier.

Manage payables. Think twice before you expand sales. The top advice that financial experts give out to small business owners is to take advantage of the payment terms of creditors. If a bill is due within 30 days, you can delay payment and not pay within the first 15 days. Meanwhile, when it comes to dealing with suppliers, discuss more flexible payment terms.

Use mobile payment solutions. There are plenty of electronic ways to send and receive payment. Get paid on the spot using apps such as Intuit GoPayment, PaySimple, or Square. This is more convenient and can reduce any hassle on your end.

Budget your money using apps. Aside from payment, you can also use apps to manage your cashflow. QuickBooks, which you can use to view your accounts and budget your money wisely, works well with Intuit GoPayment. It can estimate and predict whether your funds can support your entire business or whether your cashflow will fall short.

Sell inventory you no longer need. When there is idle equipment lying around, you can sell or lease it to another company that can put it to good use. The funds from the sale can be used to fund the business in the interim.

Conduct invoice factoring. Invoice factoring is when you sell invoices to a factoring company, which is available for business-to-business correspondences. Because invoices can be locked up until the customer pays, you can sell the invoice to another business and get more money upfront. This can be done even when it takes 15, 30 or 60 days before a customer pays. Sixty days later, as soon as the customer pays the invoice, the company does not take on any debt.

A keen eye for detail will help you maintain a steady and positive cashflow. Maximize the above strategies to your advantage and see how it unfolds. In the end, having your company’s best interests in mind, you will be able to grow your business and achieve magnificent results.

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