Running an e-commerce business has become increasingly complex and expensive in today's competitive landscape. The early days when you could simply open an online store and run a few cheap Facebook ads is long gone. Most sellers - even the biggest most experienced retailers - have found that e-commerce is at least as challenging as physical retail. This has left many senior executives scrambling to find solutions that not only drive sales, but as importantly help to improve their cash flows and bottom lines. <h3><b>The Need for More Precise Planning</b></h3> Having a strong financial plan is critical for the success of any e-commerce business. E-commerce leadership needs to set clear targets and understand breakeven customer acquisition costs and return on ad spend numbers. By setting "red, yellow, and green lights" for marketing spend, companies can effectively scale, slow down, or pull back their spending based on performance, advises Matt Putra, CFO of 8x.co, who has helped scale several e-commerce brands thanks to his expertise creating strong financial models. Regular reporting and reviewing financial statements are also essential to gain control over the business and identify areas of improvement. <blockquote>Ask suppliers for ‘micro concessions’ that don’t put too much of a burden on the supplier, but positively impact the cash conversion cycle. <ul> <li>Matt Putra, CFO of 8x.co</li> </ul> </blockquote> <h3><b>Better Budgeting and Forecasting</b></h3> Budgeting and forecasting are crucial tools for any business, yet e-commerce management have often overlooked this thinking that e-commerce was going to run just like their physical retail operations. According to Mr. Putra, the act of budgeting and forecasting motivates individuals to make changes and improve their business. He found that many businesses realized that their financial planning wasn’t working for their online business, but actually didn’t know how to set up financial guidelines and benchmarks for e-commerce. This led him to establish a service where he and his team provide ‘fractional CFO’ services to help companies create a plan and then assist them with regular reviews of their financial reports. This helps companies make informed decisions and track their progress towards financial goals. <h3><b>Cashing in on Micro Concessions</b></h3> Managing cash flow is a vital aspect of e-commerce businesses. To help companies free up cash, Mr. Putra points to the concept of the cash deal vertical cycle, which measures how long it takes to receive money from customers after paying suppliers. He advises businesses to ask suppliers for ‘micro concessions’ that don’t put too much of a burden on the supplier, but positively impact the cash conversion cycle. Small negotiations, such as asking for a lower deposit or delaying payments until the item arrives, can significantly improve cash flow and financial stability for the e-commerce seller. <h3><b>Solution for Financial Challenges</b></h3> Lenders have become more cautious, making it difficult for businesses to obtain financing. This has been particularly hard for DTC brands who until recently had enjoyed round after round of venture capital funding, with little pressure on showing a profit. Now more e-commerce businesses need to focus on breaking even quickly and improving their overall financial situation. To ease up a cash flow crunch, Mr. Putra suggests that companies explore options like inventory-based financing. These term loans, ranging from 12 to 18 months, can provide flexibility and longer repayment terms compared to traditional lines of credit. “We are a team of CFOs. Basically, a client has a goal. My job at its core is to make sure they have the resources they need to get there. We build a plan to take them from where they are to where they want to be, said Mr. Puttra. He adds that they start by evaluating the potential of the client’s business. “We need to first assess if the business is going to work as it stands today. If not, we need to show up its weakness before it's too late and the business fails.”