As an Amazon seller, cash flow pressures constantly weigh on you.
Your revenue is held in limbo by the marketplace while you try to balance the needs of your inventory and supply chain. All the while you have to pay high referral fees, invest in marketing and work on expansion.
We wouldn’t blame you for thinking that cash flow problems are simply part of the Amazon package. But they don’t have to be.
In this article, we share 6 strategies that help you avoid Amazon’s cash flow conundrum so that you can focus on what’s important—growing your business.
Why Amazon sellers need to pay attention to cash flow
Proper cash flow management can be the difference between a business that succeeds and one that fails.
A bump or two in the road won’t make or break you, but constant issues can impact your ability to pay suppliers, secure inventory, invest in marketing, cover overheads, and develop new products.
Purchase and delivery of inventory is time-consuming for any ecommerce business. When you factor in shipping time from the supplier to your warehouse (however you’ve set up your inventory process) you notice the lengthy gaps between stock orders and sales.
But this is made doubly challenging for Amazon sellers due to the marketplace withholding a percentage of revenue in the reserve for 2 weeks.
There are good reasons for keeping on top of cash flow. It’s a safety net for your business and allows you to cover unforeseen or additional costs.
It also allows you to capitalise on growth opportunities when they arise.
Think of when COVID-19 hit. The sellers with positive cash balances who could get their hands on masks were able to bring to market an in-demand product.
How to avoid the cash flow conundrum
Below are six easy strategies you can deploy to prevent cash flow problems. Figure out which ones will help you unleash your Amazon brand’s potential.
At a glance, these six strategies are:
- Track what’s coming and going
- Use forecasting to predict what you’ll earn
- Cut unnecessary expenses and reduce costs
- Negotiate discounts with your suppliers
- Closely monitor your inventory
- Get financing to help cash flow freely toward business growth
They’re best implemented together, but even using just one will help.
1. Track what’s coming and going
Let’s get to the root of most cash flow problems.
Cash flow problems arise when not enough money is coming in to cover what’s going out. So you need to track the actual comings and goings of your cash closely.
You know that Amazon will keep your revenue in purgatory for a few weeks before releasing it to you. While inconvenient (and annoying) you can plan for it.
Let’s imagine you have expenses to pay on the 5th of every month but your next release of Amazon revenue isn’t coming until the 12th. You need to keep an eye on any other planned outgoings around those dates. Otherwise, you could have negative cash flow and even miss a payment.
And you need to keep in mind that unplanned expenses can crop up. Do you have enough to cover your bills and then some? If you plan properly, you should.
2. Use forecasting to predict what you’ll earn
Businesses need to think long term when it comes to cash flow.
Cash flow forecasting helps a business predict how much cash will be in its accounts at any point in the near future. It’s based on what payment terms they have with suppliers and the length of time it takes to get access to revenue among other things.
That information can inform how much stock you need to buy, what your fixed expenses will be, what your marketing investment should be like vs what you’re likely to bring in from it, and more. Most importantly it tells you when you can afford to make payments and when you can’t.
Having this information on hand can keep you from getting into sticky financial situations. It’s a strategy you can use in tandem with tracking your accounts.
3. Cut unnecessary expenses and reduce costs
One of the ways you can protect your cash flow is by cutting unnecessary expenses. This frees up cash that has otherwise gone towards things no one is using or that were wasteful purchases.
Is there software in your tech stack going unused? Inventory that won’t shift?
In the first instance, cancel your subscription. In the second, sell it off to someone else who can.
These activities can alleviate some of the financial burdens on your business and free up cash that can be better spent or saved to cover unexpected expenses.
4. Negotiate discounts with your suppliers
This is another way of reducing costs but is a unique tactic you can deploy as an ecommerce store using inventory suppliers.
If you know what of your products perform well, you can buy them in bulk and negotiate a lower cost per item with your supplier.
A supplier won’t give you a discount without it being beneficial to them so it’s important to make the amount you order as high as you can without losing confidence in your ability to sell it.
Build a strong, reliable relationship with your supplier. Trust and familiarity go a long way in getting discounts and getting inventory in a pinch.
5. Closely monitor your inventory
With or without discounts on inventory purchases, knowing what you have, how much, and how it performs is crucial to avoiding cash flow problems.
You should keep your inventory records accurate and up to date.
Monitoring inventory levels helps you identify and resolve any inefficiencies in your supply chain. For example, you can identify slow-moving or obsolete items that can be sold or discounted.
It also keeps you from carrying excessive stock levels which can cost your business money to hold and insure. These activities can help you get access to cash in times when you need a little extra kept by.
6. Get financing to help cash flow freely toward business growth
There will always be a chance of unexpected expenses, delays in inventory, changes in demand, and reporting and forecasting that goes wrong.
So the easiest and most reliable way to avoid cash flow problems is to have fast, reliable access to capital when you need it most, especially when you’re trying to grow.
If something goes wrong such as late payments, damaged inventory, etc then financing acts as a safety net and ensures these small emergencies don’t snowball. You’ll know you have the cash to cover costs.
With financing, you can engage in activities that turbocharge growth for Amazon sellers such as:
- Investing in Amazon ads
- restocking in-demand inventory items
- testing social media marketing
- trialing new products
- and more!
Why debt can be a good thing
Debt financing, when used wisely, is a great way to dispel your cash flow concerns and can propel your brand to short and long-term success.
It’s an investment into your business's future that will allow you to make bolder decisions enabling you to strategically invest in your brand, team and goals that you might not otherwise have had the opportunity to do so.
And this is where Uncapped come into it.
Uncapped’s debt product has been designed specifically with Amazon sellers in mind.
- Speed. Be approved for funding in as little as 24 hours with access to the capital shortly after
- Flexibility. Repayment is structured to each individual Amazon seller allowing tailored terms that suit you
- Continuity. As your revenue grows, the amount of capital you can access grows meaning a long term, growth orientated relationship.
Uncapped’s Amazon Seller Funding keeps your cash flow in the green
So what are you waiting for? Free yourself from Amazon’s cash flow purgatory with Uncapped.
It takes only minutes to submit the form and less than 24 hours to hear back. We fund Amazon brands just like yours with up to €10m that can be used to buy inventory, invest in marketing, or give you breathing room when managing your cash flow.
96North, a premium Amazon candle brand, used Uncapped capital to 3x their revenue and outcompete their fiercest competitors on and off the marketplace.
Here’s how accessing Uncapped’s Amazon Funding works :
Want to check out how other Amazon sellers have accelerated growth and eased the burden of cash flow with Uncapped capital?Read about them here or go ahead and get qualified for Uncapped funding here.