How Digitalization Helps Ecommerce Businesses With Cash Flow Management

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April 11, 2022 Business

Are you still using manual processes to manage your eCommerce business’s finances? Whether it’s handwritten ledgers or even pasted data in spreadsheets, you could be losing precious time and money while leaving your cash flow and reporting open to human error and inaccuracies.

You’ll also drown in manual tasks, mountains of paperwork, and inefficient management processes that can slow down your operations. The good news is that there is a solution through digitalization. Given that eCommerce transactions by definition take place in digital spaces, the opportunity to automate aspects of your business financial management processes in this industry is particularly poignant.

Learn more about how digitalization, including cash flow management tools, can help your business improve precision and eliminate repetitive tasks.

The importance of cash flow management

Managing your cash flow allows you to track the money coming into your business and monitor it against money that goes out, such as inventory procurement, marketing costs, salaries, office rent, and associated service and utility bills.

When you manage your cash flow effectively, you’ll get an overall picture of your costs versus your revenue. You can ensure you have enough money to pay your expenses while making a profit.

Cash flow management can also help you:

Predict the amount of money available to your business in the future
Determine the amount your company needs to cover debts, such as paying suppliers
Spot trends in your cash flow and analyze changes to ensure you have enough money to keep your business running

5 Benefits of digitalizing your cash flow management

Manually managing your cash flow can take too much time and effort, slow you down, and increase the risk of errors in your cash flow statements.

This is where digitalization comes in.

Below are some of the ways digital processes help your eCommerce business manage your cash flows.

1. Automate your reporting

Maintaining easy access to real-time cash flow information is critical to making business decisions. Your cash flow reports should be accurate and easy to generate – which you can achieve through digitalization and automation.

With automation, your data can auto-populate your key financial reports, allowing you to act quickly and respond to trends to help accelerate your business’s growth.

Some of the other benefits of automated cash flow reporting include the following.

Increase your cash balance report’s accuracy by automating data collection and summarization. Automation also lets you accurately reconcile to trusted data sources, such as accounting and bank account systems.

Simplify your reporting for more accurate decision-making around your treasury and cash flow management.

Reduce your accounting team’s workload, allowing them to focus on more strategic aspects of their jobs.

Help you determine quickly the cash resources your company should tap into when necessary, including the best time to do it.

Aid you in promptly identifying inflows and outflows and your company’s pending cash requirements.

2. Speed up your reporting cadence

Replacing manual processes with digital ones allows you to see what caused bottlenecks in your workflows. It can give you valuable insights on reducing or eliminating these issues. For instance, you can identify issues in your reporting cycles, allowing you to address the gaps and, in turn, lighten the workload associated with each monthly close.

A shorter reporting cycle means your clients and employees work with information still fresh in their minds. It lets you address missing line items promptly instead of dealing with them weeks or months later, when they are likely to be disputed.

Besides improving your cash flow management, a shorter cycle can also help you provide a better customer experience. When your focus is on delivering value instead of balancing the books, it’s easier to maintain positive, long-term relationships with clients.

Even small improvements in your cash flow management process can lead to significant results for your eCommerce business.

3. Streamline invoicing and service ticketing processes

If your eCommerce business provides quality customer service, you likely have processes in place for internal reviews, job proposals, service ticketing, and invoicing your customers. However, relying on paper-based methods for these processes or using a combination of spreadsheets, pen and paper, and software can take too many steps and a lot of data entry.

The more complicated your service ticketing and invoicing are, the longer your billing cycle and the more challenging it becomes to manage your cash flow. Plus, inefficient processes can increase the chances of invoicing errors and inaccuracies.

You can set up standardized processes for the whole system with digital workflows, including scheduling, job ticketing, billing, dispatching, approvals, and payroll. A fully digital process helps you reduce or eliminate accounting backlogs, use fewer resources, and ultimately increase your cash flow.

4. Get rid of duplicate jobs

Small redundant tasks in your cash flow management process can quickly add up. The next thing you know, you’re wasting a chunk of your time and resources on jobs you can easily accomplish with a single or integrated process.

Digitalization can eliminate duplicate jobs in your cash flow management process while ensuring better accuracy, reducing errors, and increasing productivity and efficiency.

By eliminating duplicate work, your accounting and finance teams can dedicate more of their time on value-adding tasks, such as strategic planning, financial analysis, and risk management.

5. Optimize your inventory management

Your cash flow cycle depends largely on your inventory. In retail especially, entrepreneurs are required to constantly spend money on purchasing merchandise to sell, and that inventory transforms back to cash when sales come in.

As such, poor inventory management can easily reduce your cash flow. It can lead to supply stocking and customer order issues, resulting in fewer sales which, in turn, hurts your cash flow.

The key is to optimize managing your inventory, which is far easier through digitalization and leveraging the right software. A digital inventory control process using reliable software can streamline your inventory management, ultimately boosting your cash flow.

While holding extra inventory is often unavoidable and even necessary, you can’t keep too much, or it ties up cash better invested in other areas of your ecommerce business. Digital processes can help you prevent this from happening, allowing for seamless inventory management and, in turn, better cash flow management.

Digitalization is the future of seamless cash flow management

Effective and efficient cash flow management can take some time and effort before you can get your expected results.

However, implementing digital cash flow management processes and using the right tools can help streamline your workflows and efforts. You’ll be better equipped to improve your cash flow, helping you reach your business goals and allowing for future operations expansion.