Having a positive cash flow is very important to the smooth operation and success of your E-Commerce business. Here are a few ways you can keep a healthy cash flow in your business.
1. Evaluate your inventory. If you have a product that is not selling well, consider offering discounts to liquidate it. This will release cash from holding the stocks.
2 Purchase of big-ticket items. When you buy a piece of production equipment for your business, you may depreciate the full cost of the asset through section 179 and/or bonus depreciation on your business tax returns. Having less tax to pay means you have more cash to run your business.
However, do not just buy a fixed asset for your business solely based on tax implications. For example, a purchase of a $50,000 equipment may save you $17,500 if your tax rate is 35% (35% x $50,000), but you will be out of cash for at least $32,500 ($50,000 – $17,500).
3 Pay your vendors by due time. Being a good pay master will make it easier to get longer credit terms with your creditors and vendors. This will translate to good credit standing and ultimately more cash for your business.
4 Get Line of Credit from your banks. Use your business line of credit as a cushion for lean times. It acts as good insurance against cash flow problems.
5 Work closely with your accountant. Experienced and professional accountants are trained to analyze financial statements and are able to pick up items that will improve your cash flow, which may be overlooked by business owners.