The start of the year is notoriously difficult for ecommerce businesses. If they haven’t prepared, cash flow and liquidity can be low, posing challenges for stocking up and growth. Let’s take a look at the challenges your business could be facing, and how you can reduce their impact on your cash flow.
Profit taxes from last year and VAT from Q4 need to be paid in early 2024. This can be a pain when it comes to cash flow. Depending on how sales went this could be a huge outlay. On top of this, businesses still need to pay suppliers, run ads and buy inventory – all putting a strain on cash flow.
Another way taxes can impact your cash flow is tax debt. A lot of companies asked for delayed payments during Covid, which has resulted in debt towards their tax agencies. In Sweden, businesses need to repay their debts now which, in a worst case scenario, could cause bankruptcies unless they’re prepared to pay or can get tactical about their spend.
If you’re in a difficult situation, usually you can postpone your tax return by delaying reporting. But, this will only postpone the problem. It could be better to bite the bullet and pay, or look at capital solutions if you think this will work for your business.
If you have suppliers in China, you’ll know by now that you need to be prepared for Chinese New Year. Businesses shut down over this time which can disrupt production and cause delays. So, a lot of production orders are put in ahead of time to get the products delivered for the Spring/Summer season, resulting in a 50% down payment for big production orders in February.
The best way of mitigating the supply chain slowdown is what I mentioned above – to put in your orders in good time. If you want a long term solution, you could diversify or localise your supply chain, but isn’t a decision to make lightly. It would be a lot of work and a big strategic change.
If you’ve left it late and haven’t prepared, or started putting in your orders, you should make your purchases data driven. This will make sure you’re buying the right products and the right
amount of each item, size and SKU. To free up some extra capital, you could consider using inventory financing to ease your cash flow and put in those orders.
If businesses overspent in the ramp up to Black Week, they could be facing huge payments now. It’s easy to get carried away trying to hit targets, or lack real-time data for your campaigns to make informed decisions.
Meta, Google and TikTok invoices from November and December are usually to be paid by next month. So, unless they’ve put money aside they could be struggling to pay come January. To add into the mix, if businesses didn’t sell as much as anticipated or financial planning didn’t go well, they could be out of pocket without much reward.
To avoid overspend during peak season, it’s important to track data in real-time and be in the details. This means investing in solutions to give you a clear overview and actionable insights. Take a data-driven approach to understanding the different elements of each campaign and be prepared to kill anything that isn’t working.
If revenue targets weren’t hit in Q4, liquidity in Q1 will be lower while overstock will be bigger. Overall, this is probably the biggest reason for businesses struggling with cash flow, as even though they may be stuck with overstock, they also want to buy new stock for the coming year.
If you’ve overspent and are being impacted by cash flow issues now, there are three things you can do: focus on selling off overstock, lower your fixed costs and consider getting credit to ease your cash flow.
To sell off your overstock, you can run discount campaigns or promotions, make bundle deals to move multiple products at once, and shift your marketing strategy.
When lowering your fixed costs, common areas to improve are running costs like energy, internet and office overheads, redundant subscriptions, or renegotiating with suppliers. You can also see where you can optimise transport and storage, and of course keep a close eye on your marketing spend.
Credit options like Juni can help you get back on track if you’re struggling with liquidity. Bridging the gap between spending on media and inventory and selling your products can challenge your cash flow. Create a healthy cycle by choosing a finance option like Juni Capital that covers your ad and inventory spend, so you can ease your cash flow and pay back the capital when you’ve made your sales.
Getting ahead and having an ongoing plan to monitor your cash flow and plan your liquidity throughout the year will put you in a great position to handle tricky periods like this in future.
To solve problems before they arise, you can constantly monitor your cash flow. You can focus on:
It’s really important to prioritise liquidity planning to have a buffer in case things don’t turn out as you planned. The faster you grow, the more challenging liquidity is, so have a plan in place to manage it on a regular basis. To do this, you can:
By having real-time insights, a clear overview of your finances, and actionable insights you can have the information you need to take action and plan ahead to handle seasonal cash flow lows.
* Capital for invoices is available for companies registered in NL, SE, DE, FR, ES, IT, NO, and FI, upon eligibility. Fees and terms and conditions apply.
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