Small businesses that are financially stable contribute to a country’s economy and further expand their company by maintaining their financial standing. Overall, this era of internet technology has completely evolved businesses. Popular e-commerce platforms attract all small business giants to sell products online and develop their reputation globally.
New businesses quickly find a platform to set up their e-commerce organization and get amongst the competition. However, all established companies going through the developing stages, need a plan. Having an effective strategy and plan to counter any financial problem and fulfil all financial needs is the right solution to deal with the overall finance management so that your venture finds stability and growth.
Appropriate management of finance is the key to running any successful business. So as an e-commerce business owner, you must pay attention to the financial health and stable growth of your organization. It does not matter what business you have, as proper financial management is a primary requirement of every company to reach its goals and thrive in the competitive market.
By following our top 5 tips we can help you control and regulate the financial health of your business.
Freight Audit Software:
Freight auditing software can help you calculate your freight bills accurately without spending hours reading invoices line-by-line. Freight bills force companies to lose their hard-earned profits as the courier/carrier service providers overcharge retailers by making errors in the calculations. An automation system like Freight Squirrel would be highly beneficial for your business. It would allow you to spend more time focusing on other crucial things rather than wasting time and money on freight auditing by making your employees or a third-party company do it for you.
Bill checking freight audit can be very tricky. If it is being done manually, multiple mistakes will arise. However, fully automated software that sorts out all the miscalculations and catches every minor flaw by comparing invoices can save you from overpaying.
Using Freight Squirrel will help you spend your money accurately without overpaying, ultimately saving your profits and regulating the cash flow.
Manage Working Capital Cycle:
Manage your working capital cycle by collecting debt from your receivables allowing you to conveniently settle your payables and other outstanding debts. The receivable collection period should not exceed your decided credit period term because you would be liable to pay your debts using the company’s finance reserves or retained profits which is not a healthy sign for the company’s growth.
Also, beware of bad debts as bad debts can seriously damage the liquidity ratio of the company. Therefore, always collect your debts on time so you can pay your outstanding debts before the interest rates damage your financial cycle.
For running smooth operations of the overall business, your warehouse management matters immensely. You must manage your storage costs cleverly by successfully meeting the lead time.
Your storage costs include:
- Rent payments.
- Electricity bills.
- Other utility bills.
- Space occupied by unsold goods.
- Skilled and unskilled laborers.
- Fixed overhead expenditures.
Once you develop an efficient supply chain department to maintain the inventory system, you will have fewer hard times dealing with the warehouse procedures and storage costs.
Also, it is necessary to reduce the storage and holding costs of the inventory. If the storage and holding costs are high, it could impact your business profits adversely. Due to the increased holding costs, there will be less space to store more inventory goods, and fixed overheads incurred will be paid directly from your pocket.
To eliminate the risk of high storage and holding cost, inventory should be delivered on time. Damaged or obsolete purchases should be returned to the manufacturer immediately before generating a well-received note/gate pass by carefully inspecting them and finding issues on time.
In unsold inventory, you should not hold them for a longer period and quickly sell the products in sale. You can also go for purchase return contracts with the manufacturer through which if the clients do not accept the effects for some reason, you can safely return them to the manufacturer.
Use advanced marketing tactics:
You might want to use advanced marketing tactics like fully utilizing social media platforms rather than investing money in outdated marketing techniques.
Social media marketing is the number one way to outreach customers. Several social media platforms like Facebook, Instagram, Linked In, Twitter, Pinterest, and even TikTok can be used for marketing. You can use Facebook ads, hire influencers to spread the word for you, and let your social media manager handle other online campaigns that make your business stand out.
Therefore, investing money in a technique that can help you generate sizeable profits is a smart choice instead of spending it on fruitless marketing tactics like billboard signs, banners, and TVC. Such methods make you lose finance over costly traditional marketing techniques.
Adequate Capital Structure Maintenance:
The capital structure is the overall debt investments and equity raised by a company to finance its routine operations. Debt can be collected in debentures or loans. Bond issues and equity can be increased when the stocks are issued in the primary or secondary market in the form of common stocks or preferred stocks.
Therefore, to avoid experiencing financial problems, capital injection is essential. Introducing more debt and equity into the business or by reinvesting a large proportion of the profits in the form of retained earnings, the capital structure of your company runs smoothly. Hence, it helps you to improve and maintain the financial health of your organization.
To improve the financial position of your company, you must take thoughtful steps. You could also consult a professional advisor that might guide you in identifying your company’s financial needs. Your business cannot thrive without a proper monetary structure and planning. So, focus on various areas of your business that are consuming extra costs and invest that money by cutting down those costs in better and more beneficial solutions to upgrade your finance game.