With more eCommerce businesses finding that their sales numbers are down, supply chains affected, and normal work routines disrupted due to the COVID-19 pandemic, many businesses are operating under extreme levels of uncertainty.
In this short post, we’re sharing some tips to help you manage this economic downturn.
- Know your numbers
- Pay attention to cash flow
- Make a list of all mandatory v. nice-to-have expenses
- Invest in marketing
- Apply for government funding
Know your numbers
In times of fear and uncertainty, it is more important than ever to pay attention to your Xero reports and make informed data-driven decisions instead of those made on gut intuition.
At the bare minimum, you should be looking at these three financial reports:
- Balance Sheet
- Profit & Loss Statement (i.e. P&L)
- Cash Flow Statement
Pro Tip: Check out this guide with some early warning signs to look for in your P&L.
Pay attention to cash flow
Your eCommerce business will live or die based on your cash flow NOT your profit numbers. It is important to keep a closer eye on how much cash is in the bank as well as your existing terms on any revolving loan and credit card debt.
In addition, here are some additional cash flow tips to help you stay in front of any potential cash crunches:
- Identify all existing sales channels (and trends) including any affiliate channels
- Map out any known expenses and potential liabilities, including staff costs, inventory levels, loans, credit card debt, etc.
- Plan out three different cash flow forecasts, including the best case, expected, and worst-case scenarios, as well as what you’d cut in each case. This way, if you have to make deep or quick cuts, you can revert back to a logical plan instead of operating out of an emotional state.
Note: To keep the lights on, you may need to use credit cards more often during this time. The more informed you, the better decisions you’ll make at the moment when you really need it.
Want a simple forecasting template to stay on top of your cashflow? Download our free Xero Toolkit for Ecommerce businesses
Make a list of all mandatory v. nice-to-have expenses
This is a great time to categorize all of your expenses. This should cover all of your mandatory expenses, including website hosting, warehouse rent, key employees, etc. Then, also make a list of all nice-to-have expenses. These might be SaaS subscriptions that make your job easier or even employees that you could cut or make redundant if you fell under hard times.
In addition, you might want to pause or delay any unnecessary spending or capital intensive projects like a new website redesign or ordering a bunch of inventory.
You can also start proactively reaching out to vendors and suppliers to negotiate any payment plans or temporary assistance.
Invest in marketing
This might sound strange since you are in a cash crunch. However, one of the best ways to get more sales is to double down on any marketing activities with a proven ROI.
For example, if you are killing it with SEO, you’ll want to invest more time and energy into this during the downturn. In addition, look for any customer marketing strategies where investing more resources will likely net greater returns.
Then, cut out any experiential marketing initiatives or any campaigns that aren’t getting positive returns.
Apply for government funding
Many governments have announced stimulus plans to support you as a small business owner through these challenging times, you may be eligible for:
- Australian small business assistance
- US small business relief programs including the EIDL and PPP funding options
In sum, these are a few strategies to help you better weather a down economy.
Free resource to help you improve your cash flow and profitability
- Download our free Xero Toolkit for ecommerce businesses
- 8 Ways to Access eCommerce Short-Term Financing - 22 October, 2020
- A detailed guide to eCommerce inventory management - 13 October, 2020
- The 4 Essential Bookkeeping Reports Every eCommerce Business Needs - 6 October, 2020