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How to Increase Cash Flow to Your Amazon Business [Webinar Recap]
From product sourcing, inventory fulfillment and logistics, advertising, and customer service, selling on Amazon requires extensive bandwidth. Having the proper cash flow is pivotal to the scalability of your business.
In 2019, catalog expansion was the top business goal of the year for Amazon sellers. Nearly two-thirds cited expanding their existing product line as their No.1 objective, followed by diversifying to other marketplaces at 35% and launching new private label brands at 32%, according to Feedvisor data.
Yet, even enterprise businesses are confronted with cash flow gaps and negative cash flow, both of which can result from various triggers, like payment terms or not aligning your inventory position with real-time product demand. The time between when you purchase inventory to when you get paid from Amazon can sometimes take weeks. When funds are tied up, you will not have enough cash to buy new inventory, resulting in decreased sales velocity or worse.
In this webinar, Alex Sklar of Payability outlines the importance of cash flow to your business as well as strategies to better manage your existing cash flow and prevent financial gaps, ways you can benefit from having predictable cash flow, and tools and tips you can implement to generate more cash flow to support your business’s expansion in the year ahead.
The Importance of Cash Flow
Cash flow is the lifeblood of business and without consistent cash flow, your business can run several risks, such as stocking out during a holiday rush, missing payments to your vendors or suppliers, or being unable to cover payroll for your employees. You can also risk missing out on opportunities to grow your business, whether through new product verticals, discounted deals, or new marketing initiatives.
On the contrary, having consistent positive cash flow presents many benefits to your business’s growth. For instance, smoothing your cash flow reduces strain in your everyday activities because you know you have cash on hand whenever it is needed.
Available cash flow allows you to sell on your own terms, rather than planning your business around when you will receive payment from different marketplaces or when you have to pay your vendors and suppliers. Cash flow also allows you to buy and turn more inventory, as you can purchase on a faster cadence, which allows you to scale your company rapidly and reach new levels of growth.
What Are Your Options?
When looking at the financing landscape, businesses of all sizes are often overwhelmed when exploring the numerous financing options that are available to them. It is important to remember that many options are tailored for specific purposes, so not every option will be the right option for your business objectives.
In the same sense, different financial institutions serve different purposes and as a brand or retailer on Amazon, you must find one that is tailored to e-commerce needs. Begin by asking yourself several questions:
- How quickly do I need the funds?
- What is my timeline to pay back the loan?
- What are the rates for the loan?
From here, Alex outlined the pros and cons of the most common financing options, including:
- Traditional bank loans: While these tend to allow for some of the largest dollar amounts, they can also have some of the lowest APR. Also, in terms of e-commerce business needs, traditional bank loans lack flexibility on where you can spend the money and their approval times tend to take longer than other options. Traditional factoring also has the same limitations to e-commerce businesses.
- Lines of credit: These also have a longer approval time, but they can be a bit more e-commerce-friendly in that they allow more flexibility with the areas in which you can invest the money toward.
- Financial technology companies: Fintech tends to be the most accommodating option for e-commerce businesses, given their fast approval times, flexibility to spend the money however you want, and limited financials required to have the loan approved. Credit cards also allow for the same flexibility and spending opportunities with limited financials required.
Whether you want to expand your catalog, diversify markets, or hire more staff, cash flow is essential to your business’s growth. Without the proper liquidity, your business can lose out on key opportunities to scale.
Steady positive cash flow can help you increase profits quickly by increasing your sales velocity, allowing you to invest in new inventory more frequently, enabling you to rank higher on Amazon, and negotiating better pricing with your suppliers. By implementing the tips and tools outlined in this webinar, you will be equipped to generate additional cash flow to support your business’s expansion in 2020 and beyond.
For more tips and tools for generating and managing cash flow, you can access the full webinar recording here.
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