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How to Manage eCom Cash Flow for End of Year

by: OnRamp

Cash-flow management during the holiday season is unique, requiring new strategies for end-of-year success. It involves more effort than any other time of the year, but with a 13.2% year-over-year increase in holiday eCommerce sales, the rewards are well worth it. Obtaining more working capital will help you streamline inventory-management techniques and achieve maximum holiday sales – but you need clarity on how to apply those funds in advance.

Table of Contents

  • More Money? More Solutions

  • Boosting Inventory

  • Analyzing Past Data and Sales Projections

    • Related: Guide to Holiday Shipping: How to Manage the Busy Season for Your Store

  • Tightening Up Inventory Management Systems

  • New Sales and Marketing Strategies

    • Related: Checklist for Launching New Products in Your eCommerce Store

  • Increased Labor and Economic Trends That Impact Cash Flow

  • Securing Funds Now for Greater Holiday Sales Later

More Money? More Solutions

The most apparent need before the big sales rush is inventory. More extensive inventory means a need for larger storage space, and the increase in sales necessitates added labor time and costs. Packing, shipping, record-keeping, and increased customer service demands all escalate at the same time. How will you accomplish all this without tying up your cash flow?

Improving your cash-flow management for holiday-sales strategies is the answer, and the time to do so is long before Black Friday, Cyber Monday, and Small Business Saturday hit. We’ve created this dense summary of what your eCommerce business needs to do to stay ahead of the game and achieve a more significant market share than those less prepared. With so much competition, you’ll need to tighten the ship as much as possible before you set sail.

Boosting Inventory

One of the most directly helpful things is to make a large order ahead of the holiday season – and get a discount from your suppliers if you can. The earlier you talk to them, the more likely they will offer you a discount before their supplies get low. Planning with suppliers is one of the best ways you can time your inventory to be at its peak just when the spike in customer demand hits. Further, it will enable you to undercut the competition in price points and selectivity.

You’ll also be able to coordinate more strategic marketing campaigns and product promotions, timed for the best effect (and without tipping off the competition). The stronger your relationship with the supplier is now, the more likely they will give you preferred status in the future. A strong relationship pays off if you need to place last-minute orders to replenish stock on your top-performing products.

There’s no harm in asking about this beforehand – and the conversation will be smoother if you have a detailed list of the products and quantities you might need and when. It could even influence their buying habits from manufacturers to set you up for maximum future success. Start the conversation now with the intent to place orders and fill your calendar with estimated delivery dates.

Upfront cash can help you do this, especially if your funding source offers repayment plans based on future sales and without substantial interest rates from traditional lending institutions. Signing up early for new funding strategies will help you tighten your goals and make new inventory arrangements before your competition.

Analyzing Past Data and Sales Projections

Review your sales forecasts based on data from previous years and current market projections, which will help you establish the amount of funding you can and should secure. With funding plans in which repayments correlate to actual sales receipts, this is less of an issue but still an important consideration to keep future cash flow in alignment with future needs.

Analyze your past inventory data as well because this will help you match your funding to predicted inventory needs as tightly as possible. Include the following metrics in your analysis:

  • Total sales volume

  • Product performance

  • Returns types and frequencies

  • Restock costs

Doing so could reveal flaws in your inventory management system before it’s too late. As you measure your company’s previous metrics, note issues in the management platform that could siphon your holiday season earnings into extra, needless manual labor in January. It will also reduce the potential for shipping errors, which would otherwise give your company negative marks in customer service.

Tightening Up Inventory Management Systems

If needed, devote at least a good hour or two of labor hours to researching other inventory management platforms that automate the most cumbersome aspect of the analysis process described above. Automating key points include sales reports, stock levels, and SKU performance. Having this data automated enables you to make quicker decisions about not just inventory management but marketing plans as well.

Advanced inventory management platforms can now cut quarterly inventory practices from 3 to 4 days to 3 to 4 hours. If you aren’t streamlining your inventory management systems, don’t let a small amount of funding stop you – you’ll end up paying far more for added labor costs.

You’ll also need an equally streamlined process to physically audit inventory. See how efficiently you can include quality control checks along with your inventory process, which could extend into other functions as needed (e.g., shipping and transportation). Even periodically conducting a fast and narrow audit on only the top-performing products will go a long way, and it could reveal how tight your tracking procedure is overall.

New Sales and Marketing Strategies

The most effective holiday inventory management becomes quite different towards the end of the year, and so does cash flow management. You’re already taking significant steps now by reading these tips – and here are some adjustments to your sales and marketing efforts you can start making now to exert strategic control over your inventory and cash flow:

  • Bundle lower-selling items with customer favorites to get rid of them faster and make room for more critical inventory

  • Establish an independent returns-and-exchange process that won’t interfere with your inventory management procedures – this helps your team stay focused on their specialized roles

  • Start creating unique marketing campaigns that you can run on the fly according to shifting inventory trends and market demand

  • Do the same for pricing strategies, deciding which products should be priced lower or higher to exert greater control over the relationship between sales and inventory

  • Determine which products may need to be discontinued and which new products might have the best effect on increasing sales and traffic during the lead-up to the sales spike – this should inform your marketing strategies as well

  • Along the same lines, consider seasonal variations of products, especially those already performing well

Increased Labor and Economic Trends That Impact Cash Flow

Addressing seasonal shifts in inventory management is only half the battle when preparing for year’s end cash-flow needs. Look at your past HR data related to labor and other staffing matters, and start thinking about how much new financing you need to address seasonal labor needs most efficiently.

Which months have historically required more labor hours? What is the most efficient way to allocate them?

Think back subjectively to those times, and consider the impact on your company’s morale. If your staff was delighted to get overtime, start encouraging them to look as forward to the holiday season as you are. If, on the other hand, there were signs of burnout during particularly hectic years, start taking new resumes and asking your current employees about their travel plans and flexibility now.

As far as timing goes, remember that in years when factors might reduce holiday spending, such as high inflation, it can increase the proportion of sales that occur in the months before the holiday rush. A massive seasonal increase in sales still happens, but it is more spread out. This factor in 2022 asks you to consider how flexible your workforce and inventory funding is – which is exactly how flexible you need your cash flow to be.

Don’t spread your preemptive efforts out completely, though, as Black Friday (November 25th in 2022) and Cyber Monday (November 28th) still dominate the holiday spending season. Small Business Saturday (November 26th) is also gaining popularity, as more shoppers look to support independent retailers. Set yourself up to take advantage of all three – especially if you can secure funding for highly involved marketing campaigns.

However, don’t overdo it. A survey by Finder discovered that more people stated they would be enticed by end-of-year discounts of 50% than 70% or even 90%. As surprising as that is, it’s good news for retailers – though 50% is still relatively high. Discounts of 25% only had a slight boost in interest, so the higher (but not excessively high) the deal you can begin advertising, the more customers you’ll likely attract. The best way to keep prices low is to secure new financing for vital business functions without tightening your margins.

If, as the holidays approach, you see warning signs that sales projections won’t be as clustered around the significant buying periods, do not let it discourage you. Become more proactive and reasoned in your preparations because huge sales are still going to happen – you simply must be more prepared earlier to meet your buyers where (and when) they’re at.

2022 is a year to conduct more rigorous sales forecasting analyses, and expend some of your free time apprised of the most updated forecasts for year-end retail sales. As soon as you see signs, especially in your web activity, that customers are looking to do their holiday shopping earlier, leverage the marketing and promotions strategies you prepared.

Securing Funds Now for Greater Holiday Sales Later

Securing your financing needs first is key to making all of these efforts happen. New inventory, labor, and other necessary functions will be infinitely more flexible and effective. As 2022 calls for increased preparation, the most significant market share will go to online retailers who begin prepping for the holiday season now.Schedule a call with Onramp today if you need to secure quick and flexible cash funds before the buying rush happens. We provide efficient funding that correlates directly with your actual sales so you can focus more on what you do best than adhering to complicated repayment plans before your investments start to pay off.

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