Managing Cash Flow for eCommerce Businesses

By Tracey Newman, Director at Bean Ninjas

The more you can understand and predict how cash flows in and out of your eCommerce business, the easier it becomes to plan and make decisions to fuel growth in your business.

Getting clarity around your business’s cash flow helps you know more about your sales patterns, what you are spending money on, assess the risks of running out of sufficient funds, and make decisions about when is the right or wrong time to expand.

In this post, we’re going to help you better understand and manage cash flow.

How to read your cash flow statement

Your cash flow statement shows you a summary of transactions that move cash in and out of your company’s bank accounts for a set period. It’s essentially a reconciliation of your profit and loss statement and balance sheet.

This helps you and investors know how your operations are running, how money is being spent, and where the money is coming from.

You can break your cash flow statement into three key components:

  • Operating cash flow, which shows the amount of cash made from your business’s products or services
  • Cash flow from investing activities, such as buying new equipment
  • Cash flow from financing activities, such as paying dividends, receiving a business loan, or capital that is raised

When reading your cash flow statement, you want to look for whether your company is showing a positive or negative cash flow. For example, your cash flow is negative if the business is spending more than it is receiving in a given time period.

When reviewing the statement of cash flows, keep in mind what phase your business is in. Having a positive cash flow doesn’t necessarily mean that your business is earning a profit, and a negative cash flow doesn’t always indicate the business is operating at a loss.

For instance, if the business is growing rapidly and/or is using a business loan, the business may have a high burn rate because it is expanding and investing in future growth. This can be a positive for your business. Therefore, you will want to monitor it across time for a clearer indication of how your company is performing.

Why you should do cash flow forecasting (and how often you should do this!)

Cash flow forecasting helps you track the expected cash flow over a set time in the future. As a result, you will better understand how changes to your sales, costs, and purchases will impact your bank balance.

This is critical since a business can be showing a profit yet not have enough cash flow to cover costs to stay in business. Having sufficient cash is essential to being able to fulfill orders, complete payroll, and more. Understanding when any cash flow gaps may occur can help you plan so that you can avoid problems related to low cash flow.

Using cash flow forecasting can help you plan for periods where you may experience cash shortages. By knowing when these periods may happen, you can prepare for these events by arranging for external finance, and avoid missing payments.

Additionally, it can help you make better business decisions, such as potentially delaying expenses that could wait until a period where your cash flow will have improved. You can also use this knowledge to set aside any surplus to cover future low cash flow periods.

You can set up cash flow forecasts for different periods. However, a monthly forecast can help you plan and ensure that you’ll have sufficient funds monthly.

Top 3 tips for preparing cash flow forecasting
Your cash flow forecasting will be more accurate when you use realistic, up-to-date data. Additionally, if you have a clear plan or know what types of decisions you want to make for your company, the more accurate your forecast will be.

1. Be realistic when establishing sales data for your forecasting
To have a successful cash flow forecast, you need realistic data and estimates. Your projections will be less accurate if you significantly overestimate your sales. The more you understand your sales cycle, the less you’ll have to rely on guesswork. Establishing a clear system for forecasting your sales can help ensure more accurate sales data for your forecasting.

2. Double-check that you’ve accounted for all expenses
Anticipating and accounting for all your company’s expenses will help improve your cash flow forecasting accuracy. While regular expenses like payroll are easy to remember, your business likely also has one-time payments or maybe annual payments that can sometimes get missed when forecasting. When establishing your forecast, double-check the expenses to ensure nothing is accidentally missed. Don’t forget sales tax, payroll tax and income tax payments!

3. Set aside time to evaluate your projections compared to what actually happened
Regularly assessing your projections compared to actual results can help your business improve future predictions. Going through this process can help you understand why any differences occurred and help you refine and make better future assumptions. As a result, future predictions will become more accurate.


In summary, managing cash flow gives you better insights into the health and performance of your eCommerce business.

Your cash flow statement can help you evaluate how cash flows in and out of your business.

Using cash flow forecasting will help you make predictions about how cash flows through your business, so you can plan and prepare if there are likely to be periods of negative cash flow.

To get the most out of these tools, you’ll need to review them regularly. As a result, you can use these reports in conjunction with other financial statements to help guide you when making decisions about your business.

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