The most dangerous phase for an e-commerce business is growth. You need to buy more inventory before you receive payment for existing sales. This cash gap has killed more businesses than lack of demand.
The Cash Cycle
You pay your supplier 30 to 60 days before a customer buys your product. Amazon holds your payment for 14 days after the sale. Your total cash cycle can be 60 to 90 days. The faster you grow, the bigger the gap.
Managing the Gap
- Negotiate supplier terms: Move from pre-payment to 30-day terms as your relationship builds
- Stagger orders: Order more frequently in smaller quantities
- Revenue-based financing: Short-term funding based on your sales velocity
- Prioritise high-margin products: Focus growth spending on products with the best margins
Cash Flow Forecasting
Project your cash position at least 12 weeks ahead. Factor in inventory purchases, advertising spend, and Amazon disbursement schedules.
Cash flow keeping you up at night? Get in touch for e-commerce financial guidance.
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