Cash Flow Tip #1: Track and Forecast

The best way to improve cash flow is to understand it. Unfortunately for Amazon sellers, there has never been an easy way to do that. Amazon Seller Central shows you sales and revenue, including trends and breakdowns by every product you sell—but it doesn’t show you net profit or cash flow.

This leaves many sellers crunching numbers in spreadsheets. They pull data from Seller Central, bank statements, and accounting tools to plan their inventory purchases and forecast cash flow. Other sellers don’t track cash flow at all.

Now, there’s an easier way. Use a software solution that integrates directly with your marketplace accounts, banks, and accounting tools. By automatically tracking and forecasting cash flow, you can see when to expect your payments from sales revenue and how much cash you’ll have to stock up for busy seasons. You can identify the months where your cash is expected to deplete. This will help you trim expenses or seek eCommerce funding to fill the gaps.

The best thing you can do to keep growing is to plan. That means planning your expenses, setting revenue and profit targets, and working toward each milestone you set. The only way to do it effectively is to understand your cash flow.

Cash Flow Tip #2: Plan for Success

There are multiple ways to make money as an online seller. Many Amazon businesses get started with retail arbitrage. Others start with one private label product, and build a brand that expands every year. Many sellers use a mix of retail arbitrage, wholesale, and then eventually invest in building their own brand.

Whatever the case, your success will require significant upfront investment. Many sellers fail to budget enough cash to maintain momentum after an initial product launch or new listing, so let’s talk about some ways to avoid that.

Planning for success means budgeting enough cash to carry momentum beyond the first order and the first month of your listing. If you’re successful, you’ll sell your inventory and start to generate momentum for your listing, which means your potential revenue goes up. It’s imperative that you replenish your inventory, and you can’t afford to risk stocking out while you wait for your payouts.

Budget enough cash to pay for your first three orders of a new product or listing. By the time you reach your third cycle of inventory, your sales revenue will provide the cash you need to maintain momentum.

Coming up with that kind of cash can be challenging, which is why Amazon is not a “get rich quick” scheme. Sellers need to build their profit to reinvest or find strategic funding options that meet their needs.

Cash Flow Tip #3: Account for Seasonality

Your Amazon sales will have peaks and valleys throughout the year, and some of this variance is predictable. The biggest challenge in preparing for seasonality is the upfront investment in inventory. Even if you plan for a busy season, it’s still difficult to maintain your cash flow—especially through the holidays. Many sellers start ordering during summer months, knowing they won’t see the sales revenue until December or January. That can lead to a cash flow strain for up to six months of the year.

All that said, there’s a huge payoff for loading up on inventory. Plan your orders and expenses as far ahead as you can, and consider a few ways to create additional leverage for busy seasons, such as:

• Funding your inventory ahead of Black Friday and after Black Friday (if necessary). Be careful of settlement terms and do not carry credit card balances, but sometimes you need outside capital to maximize your sales.
• Communicate with suppliers in advance, and negotiate payment terms on a timeline that your business can afford.
• Trim your expenses during slower months as much as possible. The goal is to build a cash reserve to take full advantage when demand is high.

Cash flow is rarely top of mind for Amazon sellers just starting out. If you can get a handle on yours and start to use it for growth opportunities, you’re already ahead of the game. Take the first step and find a way to track and forecast cash so you always know where your business truly stands.