7 Proven Strategies to Improve Your Cash Flow

Cash flow can be tricky when you’re running an e-commerce brand. Sales might be up one quarter but down the next. 

Having available cash flow becomes that much more important when you start taking payroll, lease costs, or an unexpected repair into account. 

But there will always be ups and downs. With a few smart strategies in place, you can smooth those bumps out and take control. It’s not about making huge changes overnight – it’s about small, manageable tweaks that build up over time and give you some breathing room. 

1. Analyze Your Current Cash Flow

First off, you need to get a handle on what’s actually happening with your cash, and that’s best done by really digging through your numbers. It won’t come down to looking at the balance in your bank account, but understanding where your money is coming from, when it’s coming in and, of course, where it’s going.

Start by regularly reviewing cash flow statements to help you see patterns (like when expenses spike, what’s the busy season or when income slows down). The goal here is to get clear on what’s coming in and what’s going out so you can start planning ahead. When you know how much cash you have on-hand and what’s expected, you can make better decisions about your approach.

2. Control and Optimize Expenses

Running a business means a lot of moving parts, and expenses can easily add up. Sometimes it’s small, recurring costs that slip through the cracks. Other times, it’s bigger, more significant expenses, like hiring more staff than you actually need or paying for services you need to run your business. 

The best way to go about this is being proactive. Take a close look at your expenses, regularly. Software is helpful for your business but you need to ensure you’re only paying for the software that is bringing a return for your investment. 

Every little bit helps, and trimming  your expenses down will free up cash that could be better used elsewhere in your business.

Regular Expense Audits

A simple, but powerful, habit to stay on top of things are expense audits. Set aside some time to go through your expenses line by line (every month, quarter or year). You’d be surprised how many small charges you might find piled up over time. Spotting these and trimming the fat can make a noticeable difference to your cash flow. 

3. Enhance Inventory Management

If your business involves managing inventory, you already know that finding the sweet spot between too much and too little inventory is key to cash flowing smoothly.

A very big part of this is understanding your sales cycles and knowing which products move quickly versus those that sit on the shelves. Better inventory management means you’re not wasting money on items that don’t sell and that you’re making the most of everything that comes in.

RepSpark can help you gain better visibility into your inventory through integrations with your ERP. 

Prevent Overstocking to Reduce Holding Costs

It’s tempting to stock up on inventory when there’s a good deal or during busy seasons, but overstocking can backfire. Every extra item you hold onto is money that could’ve been used elsewhere, not to mention storage costs. So be strategic: only order what you know you can sell within a reasonable timeframe.

4. Diversify Revenue Streams

Relying on one or two revenue streams is risky – if one slows down, you’ll quickly feel the ripple effect. By diversifying the channels you’re selling through (aka balancing DTC and wholesale) you’re able to better balance your revenue streams. 

5. Use Financing Strategically

The word debt feels scary. But not all debt is bad, especially if you use it strategically. Financing can actually be a smart way to manage cash flow, whether it’s a line of credit to smooth out cash shortages or a small loan to invest in new equipment that will help you grow. The key is to use it as a tool, not a crutch. Borrow only what you need and have a payback plan ready. If used correctly, financing can give you breathing room and keep you moving forward without worries.

6. Implement a Cash Reserve Strategy

Everyone’s had a month where Murphy’s Law kicked in. Maybe a big client ran late with their payment or an unexpected expense popped up out of nowhere. These things happen, and when they do, it can look like a tailspin. So set aside a portion of your profits regularly to build a safety net for tougher times. This doesn’t mean piles of cash sitting idle, but rather having enough to cover temporary shortages.

Build an Emergency Fund for Cash Flow Shortages

An emergency fund acts as a buffer when things get tight. Start small if you have to, and gradually build up over time. Setting aside one or two months' worth of operating expenses can give you peace of mind and prevent a cash crunch from derailing your business.

7. Use Technology for Cash Flow Forecasting

Don’t underestimate the power of tech: there’s plenty of tools designed specifically to help small businesses forecast cash flow, track invoices and manage expenses. They take the guesswork out of finance management and help you plan ahead – this can, for example, mean spotting potential cash flow issues before they become problems and making adjustments early on (think chasing an unpaid invoice or holding off on a big purchase).

We’re also making it easier for your buyers to pay their invoices through one of our new products, AR Hub, that’ll make it easier for you to track all your invoices and their statuses and allow your buyers to pay their invoices with a credit card to get you money faster. 

Cash flow is a constant in business, but it doesn’t have to mean constant stress. Tightening up expenses, managing inventory more effectively and having a solid cash reserve in place puts your business in a much stronger position. 

It’s all about making thoughtful, small changes that can have a big impact down the road. And remember: managing cash flow is a process, not a one-time fix. Take it one step at a time, and don’t hesitate to lean on the tools and resources available to you. 

Need more tips or support? We’re here to help – reach out to chat about solutions tailored to your business needs.