Tips for Ecommerce Business to Manage Finances
Small business owners (i.e. retailers or businesses which utilize less people, machinery and capital) are prepared for the challenges that come their way, stepping in when there’s a seasonal sales slump, new competitors. But they weren’t prepared for this COVID-19 pandemic, leaving them unsure about coping with something this big. This outbreak has left many e-commerce businesses at high financial risk, whether from reduced productivity, lost business, disrupted supply or possibly, all of the above.
If you are an entrepreneur managing your own ecommerce venture, you are probably looking for ways to manage unexpected dips in revenues and other finances. We know that this is an uncertain, isolating time for SMB sellers. We hope you’re staying healthy, safe, and that these tips could help you with planning for business challenges resulting from the coronavirus.
Determine your impact first
To know where your business stands, you have to assess your funding. Everything that you do next will result out of this one step. You can begin by updating your statements to see where the gaps lie. Issues like a drop in sales, stunted supply, if anything is due to you, or to your vendors are problems that can impact your cash flow. Then move onto your budget and determine how each factor could impact it. In this step, you focus on 3 things.
• Improve your cash flow wherever possible, ensuring you have enough liquidity for future operations.
• Know if you need capital and even if cash isn’t required right away, find out where and how to apply for loans.
• Project the various scenarios that might occur in the future, so you can build marketing budgets, change production levels, investments required, and find suppliers needed.
Once you have a clear picture of your small business, you can expand on each area in these ways.
Be careful with cash flows
At a time when expenses are higher than revenues, cash conservation is a must. Make the switch from aggressive debt payment to monthly payments. Collaborate with suppliers to work out a deferment agreement on payments. Of course, it all depends on the kind of business you have.
In one instance you can restrict usage of working capital by putting future orders – from suppliers and buyers - on hold. In other situations, you may have to reduce overall production levels to prevent inventory build-up.
If you are undergoing a serious cash crunch, then look for alternate funding and other cash sources. Ideally, you can start with your investors, guaranteeing them with a concrete business plan stipulating targets, growth process. You can also seek out SMB/SME loans from banks subject to varying conditions.
• Loans are designed to either fulfil capital requirements, meet growth targets, address liquidity gaps.
• Applicants have to fulfil eligibility requirements for availing such loans.
Build an emergency plan or start budgeting
If you’re bringing in capital investments, prioritise where it needs to be applied. In other words, now is the best time for cost-cutting. You can lower travelling, expenditure on non-essential goods, tools, etc. Reduce the amount of services you use like cleaning services, software subscriptions, phone, and internet plans. One big step that can boost your budget is to remove, suspend noncritical subscriptions to your registered customers. It might impact your marketing efforts to some extent but taking this step now could free up budget for bigger activities after the lockdown.
Revisit your sales strategy
We know this point might sound contradictory but, you may enter a sellers market if things get worse. It means that overall demand is going to be higher than the supply of goods. In this scenario, financial planning could include altering product range price points. Sure, you might have to sell at higher prices depending on your situation, but at least you won’t lose buyers by not fulfilling their orders.
Sales will influence your finances, so consider looking for new delivery channels in the near future, even if it impacts margins. Think about new, domestic suppliers – local providers are expensive, but they come with a host of other plus points. These include shorter delivery routes, easier access to contact points, and may not be as badly affected as some global suppliers are currently.
In case you run short of suppliers and can’t start operations with local ones, shift your focus to core areas, the top-selling items that earn higher revenues. Some e-commerce marketplaces have transformed themselves into lockdown lifelines by prioritising purchases for essential products and services.
Ultimately this outbreak risk situation brings big changes, but luckily those can be fixed. What we’ve suggested here is just an initial step to building a solid COVID-19 business plan. As always, we’re here with the best resources, tips, advice on the e-commerce world.
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