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Cash Flow Management Simplified

Keeping your business running smoothly doesn't have to be a balancing act.

Having access to cash is essential when it comes to the financial management of a growing company.

However, you might find the period when you have paid your suppliers but are still waiting to receive payments from your customers is a little problematic.

For online sellers, we can add the dimensions of extra fees and the time it sometimes takes to withdraw money from PayPal or Amazon.

To keep the cash flowing—and your business running smoothly—here are a few strategies to help with your cash flow management.

Keep your cash as long as possible

In cash flow management, the trick is to delay your own payments as long as possible without making late payments, and trying to make as many sales as possible to get the money back into your business.

Don’t pay your invoices early unless it saves you money. Instead, keep the cash in your company for as long as possible. Don’t think that suppliers care if you pay early; they don’t. As long as they receive their money by the due date, you should be fine.

It’s also important to be realistic when managing cash flow inconsistencies. Look at the history of your business and don’t put yourself into situations where you already know you might not be able to pay your invoices. Also, remember to take into account that seasons can affect your sales. For instance, online sellers know summers can often be a bit slow, while Christmas is a boom.

No matter how much time you spend managing your cash flow, there will be times where you’re in need of cash

Look for funding

Some sellers can pre-empt inconsistencies by looking at alternative funding sources. iwoca, a company in the U.K. that provides small-business loans for online retailers, is a good option to start with. It can preapprove sellers for loans and get funds into their accounts the same day.

Anita, who runs her eBay shop, source4bits, alongside her website under the same name, took out a short-term business loan to grow her sales.

By taking a business loan from iwoca, she and her partner were able to add new product ranges and buy larger amounts of stock. This not only increased their net profits, they also saw their sales grow much quicker than before. The working capital gave the duo the opportunity to be more competitive. Anita tells us sales grew by 20 percent in total during the period of the loan.

Be proactive

We know, though, that no matter how much time you spend managing your cash flow, there will be times where you’re in need of cash. This doesn’t mean you have a bad business. It’s simply proof that cash flow management will never be an easy job.

To make it easier on yourself, communicate with your suppliers or other creditors at all times. If you are late on a payment, let them know. Most companies will be willing to work with you as long as they can see that you’re trying.

Also, consider securing funds early, so you don’t risk missing out on a great trade deal or paying large amounts of interest on late payments with your suppliers.

Cash flow management doesn’t have to be a challenge. By being proactive and planning for the future, you can help alleviate the stress associated with keeping your balance sheet in check and ensure you make a healthy profit.

About the author

Camilla Gilbro
Camilla is the community manager at iwoca. Since graduating from Copenhagen Business School, with a degree in business communication, Camilla has been working to make life easier for small and medium enterprise businesses by offering advice and sharing experiences via entrepreneur magazines and websites. She loves a good chat about anything, from business plans to social media. Opinions expressed here may not be shared by The Online Seller and/or its principals.

  • Eric Blair

    And the article-length ads for finance companies posing as “news” continues. Where are the disclaimers? Mistake number 1 for many small businesses – running on debt.

  • Donald Eisel

    On the topic of returns. I feel that sellers who except returns Greatly improve not only their overall success in building customer confidence, they also help remove the stigma attached to online buying. Those of us who’ve been around eBay long enough know that eBay has been the brunt of many a jokes. Only recently buyers are becoming more comfortable with online shopping. Naturally we cannot compete with large box stores and retail outlets. These companies have departments that handle only returns and ensure that the customer is satisfied in every way. Let’s be honest, there are a lot of stinkers on both sides of the spectrum, buyers and sellers who create a disappointing selling/buying experience. I feel that the upcoming changes in the return policies will definitely help us all in the long run. By weeding out those who make these changes necessary, I feel I speak not only for myself when I say that eBay has presented a nice opportunity for anyone who’s willing to put in a little bit of work, understand the importance of customer service, and that with all Successful companies, Necessary Changes help build a Strong foundation.
    Having owned a couple of small business along with the tremendous headaches that come with such freedom, keeping good records of inventory controls and losses, separate those who succeed and those who fail. When it comes to items that are returned and are not re-sellable, Any good accountant knows exactly where to record this when preparing your Taxes. There’s also a good feeling Benefit! Donate the un-sellable items to the less fortunate. And don’t forget to get a receipt. The Sky really is the limit!
    Ps: Might I make a suggestion?
    • how about (eBay Pro and eBay lite.Bay pro is already established. EBay Lite, a lighter side of auctioning miscellaneous used items. Perfect for someone who’s looking for extra cash and making a difference by recycling items that would otherwise be thrown out. This would give a first-time potential buyer a choice. Thanks, kbhz seller since 2001

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