Financing ECommerce Tips for Small Businesses

Financing ECommerce Tips for Small Businesses

Useful ECommerce Tips for Small Businesses 

Effective eCommerce tips for small businesses cannot be combined in a secret formula that will work for all companies. Every business operates a bit differently; however, there are several best practices that can serve to help you keep essential aspects in check, especially your financial stability.

Of course, finances are just the beginning of a company’s success. Sales, marketing, innovation, and development are also vital. But if your finances aren't in good shape, none of your other strategies have legs to stand on, making it imperative to get the financing part right. Companies often don’t have too many problems getting loans, but what’s really needed for a strong financial position is working capital. Following these tips will help you improve your cash flow so you can run a smooth, growth-oriented business.

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1) Keep a Close Eye on Your Cash Flow 

Monitoring your cash flow is our top eCommerce tip for small businesses. Cash flow consists of cash coming in and cash going out due to operations, investment, and financing. 

Of course, cash flow is positive when more money enters than leaves the business. Negative cash flow occurs when bills, payroll, inventory purchases, etc. exceed what cash you’re bringing in, and with eCommerce businesses, incoming cash flow can be sporadic. Negative cash flow does not necessarily imply long-term losses in the same way that positive cash flow does not necessarily indicate long-term profits.

In case your eCommerce cash flow is unfavorable, you need not be alarmed. Online businesses face this scenario regularly, and although it can have some pressures and consequences, there are modern financing options that can help.

Among the many ways you can accomplish this, you may want to set aside some time on a regular basis to check on your cash flow, for example, in order to spot any signs that indicate you’ll soon be needing additional funds. The key to sustaining cash flow is to not wait until the balance shifts.

It seems like a simple tip, and it is. This review usually gets put aside for a long time as the eCommerce business owner concentrates on other tasks. You'll be able to make better financial decisions (instead of asking for quick loans from friends and family, for example) on time when you have the habit of reviewing them in detail in a disciplined way.

Related: The Smartest Way to Get Financing for eCommerce Companies

2) Check Your Inventory Levels Constantly

Keeping up with the demands of your customers will ensure the product arrives at their doorsteps in a timely manner after purchase. Increased demand may seem fantastic, but if you stock out and can’t fill orders, you can lose customers forever. Stockouts cost retailers an estimated $1 trillion every year. 

Forecasting sales is beneficial for keeping your inventory current. A complement to this can be to constantly monitor your inventory levels and create alerts so you can buy or produce more on time.

When cash flow is running thin, these alerts may not be reliable if it is impossible to purchase inventory without going into debt. Take note of how eCommerce tips for small businesses connect. Even if your business urgently needs credit, it may have trouble obtaining it on favorable terms. 

This situation can become a real problem when your brand and service are in extraordinarily high demand.

3) Manage and Plan for Payroll Expenses

Payroll is often cited as the number one largest company expense, and you must budget to stay on track, understand legal requirements and taxes, and be sure you can reliably and consistently pay your staff. Include any bonuses, commissions, benefits, etc. and that your forecasted sales can cover payroll expenses.

Depending on the size of your company and your budget, you may opt for payroll software and spring for an employee to manage human resources duties, including recruitment, selection, and payroll functions. You may also decide to outsource payroll to a service provider. 

One of the best ways to retain the best staff and, therefore, ensure stability in your business is to meet payment obligations on time. The last thing you want is to find yourself unable to pay staff in full or on time because you have not managed or projected your income and expenses correctly.

If this unfortunate scenario occurs, you may find that you run at the last minute to pay your employees or, worse yet, need to negotiate retroactive salaries and delay your payment. 

4) Don’t Neglect Essential Services Aimed at Growth

Businesses tend to deprioritize some areas that seem less important to growth, such as marketing and innovation. Maybe at some point, you had to cancel campaigns and initiatives related to marketing, research, or development.

Having reduced or eliminated many of these items has led you to notice that your business is not growing as quickly as it used to. Suddenly, that goal of increasing sales seems out of reach. 

But with the right financing tools used strategically, you can succeed and continue growing at a healthy pace even in these difficult circumstances. These eCommerce tips for small businesses encourage you to consider making a budget for these expenses and inquire about smart financing options that are so beneficial to your business in order to prevent this situation from occurring.

5) Never Leave Your Personal Finances Behind 

Especially if you are an entrepreneur, it is possible that you are one of those people who give everything for your business. But taking it to the point where your personal savings, retirement, or emergency fund are at risk can put you in a bind if the company needs cash.

You should limit personal funds, lines of credit, savings, or even credit cards to keep operations running. Furthermore, you shouldn't even need to make the hard decision of choosing between a personal or family project and running the business a little longer. Even if you're temporarily maintaining your business to recover cash flow stability, you may have seen an impact on your ability to cover a personal emergency.

It is best to make your personal and family finances a top priority and be aware of how they are doing. At the same time, you grow your business with other more sophisticated financial tools.

Related: How To Get Funding for an Online Store

6) Rely on Specific ECommerce Financial Options  

Ecommerce financing is an excellent alternative financing option for online sellers due to its alignment with fluctuations in sales and shorter sales cycles. You can leverage this specialized funding solution to gain access to cash more quickly while avoiding the risks associated with many traditional banking products that do not care if your sales are slow - you still must pay a monthly minimum.

For example, your eCommerce financing partner won’t require minimum payments or charge interest. Instead, they will connect directly to your Amazon Seller Central and/or Shopify; Store as well as your bank. They automatically debit a small percentage of every sale that goes towards paying back what they provided you. No sales? They don’t debit anything from your account. There is no interest accruing or monthly minimums. They deposit cash into your bank when you sell products. It’s a cash inflow that aligns perfectly with your sales cycle.

As you evaluate eCommerce-specific financing options, you should consider the following criteria:

It’s software-based

In order to solve your challenges as an eCommerce merchant, you must choose a solution that provides a unique software platform. Due to its integration with your online store and bank, you need not take any action. Based on your sales, the eCommerce financing company debits and deposits cash automatically, and they only take a small percentage of your sales income, up to 1%.

Your success matters

Choosing a company that puts your business first is the best way to make it easier, cheaper and safer to get the cash your business needs to grow. You may have noticed that most banks don’t have this mindset. In fact, they are built on the notion that they make more when you can’t pay them back. But with these more innovative financing models, instead of worrying about cash flow, you can build your operations by getting money based on product sales rather than on credit history, longevity or consistent sales. They never charge late fees, set minimum payment amounts, or send out monthly invoices.

Backed by experts

A financial partner with eCommerce experience will have a team with several years of knowledge. Make sure you look for companies with a track record of success, investors with a strong portfolio, and a unique value proposition for eCommerce financing.

Straightforward implementation process

Getting prequalified and integrating your online store should take only seconds instead of weeks. You can have your money deposited into your bank account with a good company within a day. You request a cash amount, and the financial entity deposits it directly into your bank account.

Consider Financing Based on Sales

Ecommerce businesses face many challenges, not all of which can be solved by one solution. Having a variety of financial options in your capital stack is always smart. However, you can overcome various obstacles in the complex realm of online selling business by getting a new flow of cash.

For small businesses, obtaining loans and paying off credit cards can be tedious and lengthy, and the interest rates on credit cards make paying off the debt even more challenging. Those are some viable, traditional funding options, but you'd be wise to diversify with less expensive ones.

Depending on your business needs, there are solutions that offer eCommerce-specific financing alternatives. You are not obligated to conform to a conventional business model by participating in this entity. 

Look for a partner who understands your unique financing requirements and wants to empower you to succeed, not strap you to debt. Contact us to take advantage of eCommerce financing and get interest-free cash with easy conditions.