It is common knowledge that many E-Commerce businesses fail to achieve their maximum potential because of their apparent inability to adequately understand and manage their cash flows. Cash remains the most important component of the business. If the business fails to generate cash regularly, it will collapse. It is evident from the fact that only 25% of the E-Commerce businesses sustain beyond two years of its incorporation. Cash flow is the life-blood of a business. The inflow of cash takes place as a result of sales and outflow happens when the cash is spent on inventories, payroll, or supplies. The major concern for any business is to ensure positive cash flow in the business by executing proper control over cash outflows and take pro-active actions to increase its cash inflows.
Cash Flow Issues faced by an E-Commerce businesses
The owner and the accountant of the E-Commerce business must keep track of the following factors to ensure adequate cash flow management –
- Proper forecast and projection enables appropriate decision making, thereby allowing increased cash inflows and controlled cash outflows.
- The business must not tie-up most of its capital in inventories. It makes it less flexible.
- Accounts receivable management ensures billing and collection on timely basis. it is of prime importance for an E-Commerce business.
- Management must monitor the efficiency and productivity of the employees on periodic basis. It must abstain from the temptation of over hiring.