What Scaling Ecommerce Companies Need to Know About Finances


If you’re at the helm of an online selling brand, then, and you’re aspiring to reach that next level, how can you get all your ducks in a row? What do you need to know about handling your corporate finances? Here are some key points:

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Seasons come and go, civilisations rise and fall, and the fashion industry lurches ahead in puzzling directions, but one thing never changes: money makes the world go round. The business world, at least, and pretty much everything else by extension.

It’s in pursuit of money that ecommerce businesses seek to scale, of course, but their eagerness to seize the profits of tomorrow can leave them vulnerable to the financial obligations of today. Only by having your finances in order can you have the stable foundation needed to launch a major company expansion.

Cash flow is mission-critical

If you want to run through potential financial KPIs, you can keep going for quite some time, because there’s a huge selection of metrics that get cited as significant — but when you’re entering a big growth phase, you can easily make the mistake of missing the woods for the trees. What really matters overall is your cash flow: the money that’s entering your business, and the money that’s leaving it.

Essentially, your business needs liquidity to be flexible. You can be in a debt, or struggle with supply deals, or have a tough time hiring, but as long as you have money circulating through your accounts, you can keep moving. When that circulation dries up, the business dies. It can’t make moves, invest in new things, take changes, or fight challenges. So look at the fancier KPIs if you think it’s valuable, but only if you’re certain that your cash flow is up to the task.

Running out of funds in the early-growth stage can prevent your business from ever reaching its full potential. As a modern ecommerce business, sometimes there are options to get extra funding for scaling and growth without giving up equity. If you experience unexpected growth, this means you won’t always have to go down the traditional route to combat cash flow problems.

Recommended reading: 5 Top Tips for Managing Your Business Finances Better

Accounting software is invaluable

Instead of trying to muddle through using half-baked spreadsheets, it’s a good idea to invest in using accounting software. The investment will be more than justified by the long-term value of having tax rates and invoices worked out for you.

You might be using the software yourself, but ideally you should bring in someone to use the software on your behalf. It could be a full-time chief financial officer (CFO), or a financial consultant to stop by every so often to review your books and offer constructive criticism. There’s no set approach you must take, so it’s whatever works in your situation.

Recommended reading: Tips for Start-ups on Choosing the Right Accounting Software

Efficiency demands automation

The menial tasks inevitably pile up as any business grows, and the ecommerce model doesn’t present any exceptions to this rule. There will be emails to send, inventories to manage, customer values to determine, and support tickets to field. Get stuck working on these tasks, and you can say goodbye to any creative planning — planning that you’ll need if you’re going to keep expanding your business.

That’s why you must implement automation wherever appropriate. Find email automation software to queue up situational emails, pick up an inventory-management suite, and — above all else — ensure that your ecommerce CMS is a capable foundation. You might have an enterprise-level platform, but there are distinctions: some are better at security, others offer more custom options and integrations.

And yes, you might baulk at the idea of migrating platform at the scaling stage, but if it’s justified, then you can’t overlook the prospect. It’s much like rebranding: once you know it needs to be done, it only gets harder (and more expensive) the longer you leave it, so you need to bite the bullet and simply get it done.


Your time is worth money

When you get started in ecommerce, it’s easy to feel that your time is worth approximately nothing. After all, you don’t know what you’re doing, and you feel like a complete fraud. It would be ludicrous to consider your wild scrambling worthwhile, right? But all your time invested in your work is worth something to you, and once you’ve reached the point of scaling, your time is one of the most valuable things your company can offer.

Remember: you’re the lynchpin. Everything that happens with your store goes through you, and when you’re not free to deal with something, it simply doesn’t get addressed. Your startup-style determination to be frugal can quickly become counter-productive when it sees you spending 10 hours working on something to avoid paying an expert to spend 1 hour getting it done properly. So think about what an hour of your time is really worth for the business, and don’t sell yourself short. Free up as much of your time as possible, so you can spend it on the high-level stuff.

Scaling an ecommerce business can be a brutal affair, with the basic structure of your operation being subjected to increasing pressure and scrutiny, so you need to be aware of each one of these financial tips. Keep your cash flow going, and use all the resources at your disposal to free up your time, and you’ll be in with a great shot of flourishing.


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Tuesday, 19 November 2019
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