How to optimise cash flow management when markets are down

Cash flow strategies are crucial for ecommerce businesses. Recent research has found that 37% of SMEs have cited cash flow as a major concern, a 23% increase since Q4 of 2021.

The gap between production and sales is growing larger in the current economic climate. As the cost of inventory, energy, and financing goes up, while consumers tighten their belts in the face of the cost of living crisis, ecommerce businesses may find themselves with less working capital to support operations.

These underlying macroeconomic pressures are likely to be with us for some time. But fortunately, there are measures businesses can take to optimise cash flow and get through the hard times.

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How ecommerce businesses can improve cash flow

Do better bookkeeping

Before managing your cash flow, it’s essential to assess your bookkeeping. Understanding how your money is coming and going is crucial in making efficiencies later. When reviewing your books, pay special attention to the following areas:

• Invoices received (accounts payable)
• Invoices paid
• Taxes withheld

With a clear, up-to-date picture of these metrics, you’ll quickly see the best places to implement cash flow strategies. Look for software and integrations that make it easy to do your bookkeeping and collect the right data. For example, you can automate syncing your transactions from Juni directly into your Xero account, saving you time on your bookkeeping. You can get an up-to-date overview of your finances to help you make the right decisions.

Enhance your invoicing systems

Paying supplier invoices in a regular, timely way ensures you’re on top of your cash flow. But when relying on manual or overly complex invoicing systems, bills can be forgotten and make for nasty surprises later. Upgrading your invoicing system can make a big difference.

Upgrade your payments

Reassessing your payment methods is an excellent way for an ecommerce business to improve cash flow. Since some payment gateways are quicker to reconcile than others, switching to one with low fees and fast reconciliation can make sure you’ve got the capital you need when you need it.

If you want to track all your funds in one place, consider using Stripe and Paypal, which can integrate with Juni.

Identify where to cut costs

In many cases, the problem isn’t that businesses don’t have enough cash coming in but when they have access to it. For example, the gap between spending on producing a product and recouping the money from sales can leave businesses needing better cash flow.

With a complete overview of your company's finances, you can say when you have the most available capital in a period. That means you can rearrange your expenses to ensure consistent cash flow for unforeseen needs. One way is to identify efficiencies that can help improve cash flow. Here are some common areas for improvement:

• Renegotiate with suppliers or even switch them.
• Take a look at your outgoings for energy, internet, and communications.
• Cut unnecessary expenses such as redundant subscriptions.
• Assess whether localising your supply chain will save on transport and storage.
• Monitor your marketing and see how you can optimise your spend.
• Consider remote working to cut down on office size and overheads.
• Outsourcing non-critical tasks could bring lower costs.

These aren’t one-size-fits-all solutions. For some businesses keeping staff in the office or maintaining a large marketing budget are essential. But with a full overview of your finances, you can decide where to cut and invest for optimal cash flow improvement.

Keep track of marketing spend

As we’ve seen, marketing spend can be essential for a business’s success, but that doesn’t mean you can’t make efficiencies.

Getting the right insights into your marketing spend is essential for optimisation. It’s crucial not only to measure how much you’re spending but also if it’s worth it. Focus on ROI and CAC; if your ads aren’t cutting it, consider reevaluating or pausing them.

With Juni, you can integrate Facebook and Google Ads, so you have all your data in one place to make the right decisions for your business.

Improve inventory management

Are you using all of your inventory? Is some of it taking up costly warehouse space or losing value over time? Consider taking stock of your assets and planning accordingly. Here’s some food for thought on how you could make some changes:

• Share warehouse space
• Moving inventory using bundle deals
• Invest in logistics automation
• Use inventory software

How you make changes depends on your goal. But, with the right decisions, you may be able to cut down on storage and shipping costs, find better suppliers, and improve cash flow by liquidating inventory that’s surplus to requirement.

Plan ahead

Maintaining cash flow is always a balancing act for small businesses. Forecasting can help you plan and is especially useful when it comes to seasonality. It’s a good place to start if your cash flow doesn’t feel consistent.

Budgeting can help you manage your cash flow. When putting together your budget, you can figure out where to make improvements and where to cut costs.

For a complete guide to balancing budgets and making accurate ecommerce forecasts, take a look at this.

Find the right financing

Funding can be an excellent way to improve cash flow in difficult times. But during periods of high inflation and interest rate rises, traditional debt financing from banks can be too expensive and risky for many SMEs to consider. During market downturns, banks are also considerably more likely to reject applications.

Fortunately, a new wave of alternative financing solutions has enabled SMEs to access the capital they need to improve cash flow. Revenue-based embedded finance, for instance, allows businesses to repay loans as a percentage of revenue rather than a fixed interest rate, making it easier not to default on loans when times are tough. With Juni’s flexible credit lines and cashback, ecommerce businesses can access cheap credit and enjoy a cash flow boost when needed.

Want to know more about financing when markets are down? Read our blog on ‘How market volatility impacts raising working capital.’

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Implement your cash flow strategy

As we’ve seen, knowledge is half the battle when it comes to ways a business can improve its cash flow. The first thing an ecommerce business needs to do before planning a set of cash flow strategies is to get a complete, accurate overview of its finances and operations. With Juni, this is easier than ever.

Our all-in-one platform lets ecommerce businesses simplify admin and get a full view of their accounts and services on one innovative dashboard with over 2,400 integrations. Juni provides all the virtual cards you need, and with IBAN accounts in USD, EUR, GBP and SEK, you can integrate with global banks and payment gateways to grow your business and improve cash flow. When you need increased cash flow right away, we even offer flexible credit lines from £10k to £2 million, and you can earn cashback on all eligible card spend.

Book a demo today for more on how Juni can help your business gain and maintain cash flow when times are tough.