The festive season is on the way, and for lots of online retailers, it’s the busiest and most crucial time of the year, especially with Brits predicted to spend £200bn over Black Friday and Christmas.
To survive and thrive during this period, having a healthy cashflow for your online retail business is vital, but notoriously difficult for SMEs to maintain.
With extra pressure due to an increased amount of staff holidays, early payroll, bonuses, inventory management and long payment terms from retailers, cash flow can be one of the main headaches for business owners at Christmas time.
So, we’ve brought together some of the best tips and insight on how online retailers can manage Christmas cashflow effectively. While these tips are pertinent to Christmas, they can also apply year-round to help eCommerce businesses ensure that they stay in control of their cash flow and take proactive action if needed at any time.
Preparation is the best step to prevent poor cash flow
It sounds simple, but preparation is the best step you can take to manage cashflow properly. The best way to do is setting a monthly budget for your business, as this will set you on the right path to having a positive cash flow at all times, regardless of any unseen bumps in the road, and leave you in a good place at the end of the year too. Then, you can forecast your cash flow for each month leading up to Christmas, ensuring that you have the funds to cover unexpected costs or increased prices due to issues such as:- Absent staff
- Stock shortages and inventory management
- Delivery fees
Take a proactive approach to Christmas sales
It’s never too early to tell your customers about the great deals you’re putting on this year, and ahead of December, online retailers have the chance to capitalise on the early online shopping crowd. With around 25% of Brits admitting to starting their Christmas shopping in August, you can begin marketing to your target audience much earlier in the year too, but increasing your transactions at the start of Q4 can always give a timely boost to your revenue. Using a variety of different marketing channels to promote great offers can result in an influx of sales at this crucial time and 74% of shoppers agree that they are always looking out for special offers and promotions. Online retailers are also particularly well placed to take advantage of Black Friday and Cyber Monday every year. You’ll need to make sure you have the stock and capacity to go through with a promotion, but, if successful, you’ll be well placed to have a strong end to the calendar year thanks to those sales.Calculate costs and risk carefully
When business is going well, it’s easy to look at spending more on costs that should be carefully monitored, from extra stock to the staff Christmas party. However, it’s important to anticipate less busy months, especially with January being one of the traditionally low-performing months for retail. This doesn’t necessarily mean cutting costs – you’ll simply need to ensure you’re only spending money on the right things in the run up to Christmas. The benefits of this will last into the New Year, as you’ll have the cashflow that enables you to invest in the business during the quieter months, or alternatively enough funds to tide it over during quieter times.Communicate with partners on payments
A common headache for any business owner is overdue invoices, with the Federation of Small Businesses estimating that late payments during Christmas have caused as many as 50,000 business failures annually, with an economic cost coming in at £2.4 billion. This is why it’s important to have discussions with partners on payments, and when they can be fulfilled. Set clear deadlines, as this will go a long way to help your planning and forecasting. Take the time to chat with them to see if payments on the same date are possible, as circumstances can change during Christmas. Remember to ask them what their preferred payment method is, as you might find payments in your business account sooner if you’re able to accommodate the likes of PayPal or direct bank transfers. Chasing up invoices is never an enjoyable task for SME business owners, but it’s a crucial one for ensuring you have all the funds due to you ahead of Christmas.Keep a close eye on inventory management
Managing your inventory properly goes hand in hand with your cashflow, as without a clear understanding of your stock levels, you risk failing to meet customer demand, or being left with too many products to sell at a good margin. Adopting processes and systems to stay on top of your inventory is well worth the time as you could benefit from satisfied customers, less waste and better sales figures. Online retailers need to take three key steps to achieve this:- Track supply and demand
- Implement quality control
- Invest in technology
