Here's the thing about growing an ecommerce business: it's exciting, it's exhausting, and it can absolutely drain your cash faster than you'd think possible. You're selling more, revenue is climbing, but somehow your bank balance isn't keeping pace. Sound familiar?
The good news? You're not alone, and this is totally solvable. Let's dig into why growth creates cashflow challenges and more importantly: what you can do about it.
When you're scaling up, cash gets trapped in three main places:
• Inventory: You need to buy more stock before you can sell it. That's cash going out weeks or even months before revenue comes in.
• Marketing: To keep growth going, you're probably spending on ads. More customers means higher ad spend, and that hits your bank account immediately.
• Payment delays: If you're selling on marketplaces or offering payment terms to your stockists, there's a gap between when you ship andwhen you actually get paid.
This is the classic growth paradox - you can be profitable on paper but still running out of cash. It's not a sign you're doing something wrong; it's just how fast-growing businesses work.
Here's where most ecommerce brands get stuck: they're looking at last month's numbers when they need to see today's reality. If you're checking your cash flow once a month when your bank statement arrives, you're flying blind.
What to do instead:
• Build a live cash flow dashboard. Connect your bank accounts, payment processors, and accounting software so you can seeexactly where you stand right now. We build these for our clients all the time, think of it as your financial command center.
• Track your burn rate weekly. How fast is cash flowing out? This isn't about being pessimistic, it's about knowing your runway so you can make smart decisions.
• Forecast the next 90 days /13 weeks. Map out expected expenses (inventory orders, ad spend, payroll) and income (sales, payment settlements). This gives you early warning if you're heading for a crunch.
Having real-time data means you can spot issues before they become emergencies. Love to see businesses make proactive decisions instead of scrambling last minute!
Inventory is usually the biggest cash drain in ecommerce. The trick is finding the sweet spot: enough stock to avoid stockouts, but not so much that your money's gathering dust in a warehouse.
Smart inventory strategies:
• Know your inventory turn rate. How many times per year are you selling through your stock? If it's low, you're tying up too much cash. Aim for higher turnover on your bestsellers.
• Use ABC analysis. Your top 20% of productsprobably generate 80% of revenue. Keep those well-stocked, but be leaner withslower movers.
• Negotiate better payment terms. Can you extend payment windows with suppliers? Even shifting from 30 to 45 days can make a huge difference to your working capital.
• Consider pre-orders for new launches. Get cash in before you pay for inventory. It's a win-win.
We help clients model differentinventory scenarios - what happens if you order less but more frequently? What ifyou phase out underperformers? The answers can free up tens of thousands in cash.
The faster cash comes in, the healthier your cash flow. Here are some ways to speed things up:
• Shorten payment cycles. If you're on TikTok or other marketplaces, look into faster payout options. Some platforms offer daily or weekly settlements for a small fee - often worth it when you're cash-tight.
• Incentivize upfront payment. Offer a small discount for customers who pay immediately versus using payment plans. A 1% discount beats waiting 30 days for your money almost every time.
• Run strategic promotions. Need a cash injection? A well-timed flash sale can bring revenue forward. Just make sure you're not sacrificing margin to the point where it's counterproductive.
• Launch a subscription or membership. Recurring revenue is a cash flow superpower. Even a small subscription component can stabilise your income stream.
You can't (and shouldn't) slash spending when you're growing, but you can be smarter about when and how cashleaves your business.
• Align big expenses with revenue. Don't order three months of inventory right before a slow season. Time your large purchases to match when cash is coming in.
• Automate the small stuff. Use tools that automatically reconcile expenses, track spending, and flag unusual charges. Saves time and prevents cash leaks from forgotten subscriptions or duplicate charges.
• Review your ROAS constantly. Marketingis usually your second-biggest cash outflow after inventory. Make sure every pound spent is working hard and cut what's not performing and double down on winners.
• Negotiate with vendors. Ask for extended terms,volume discounts, or flexible payment schedules. Most suppliers would ratherkeep a good customer happy than lose the business.
Sometimes the smartest move isbringing in external cash to fuel growth. Just make sure you understand whatyou're signing up for.
Common options:
• Revenue-based financing: Borrow against future sales. Repayments flex with revenue, which can be easier on cash flow than fixed loan payments.
• Inventory financing: Lenders advance cash to buyinventory, then you repay as it sells. Good for seasonal businesses or big restocks.
• Business line of credit: Flexibility to drawdown when you need it, only pay interest on what you use. Great safety net for lumpy cash flow.
• Equity investment: Bringing in investors meansgiving up ownership, but it can provide the fuel for serious scale withoutmonthly repayments.
Before you take on debt orequity, run the numbers. What will this cost you? What's the expected return?We help clients model funding scenarios to see which option actually makessense for their specific situation.
When you're growing fast, the temptation is to reinvest every penny back into the business. But here's thething: having a cash cushion isn't boring—it's smart.
Aim to set aside enough to cover1-2 months of operating expenses. This gives you breathing room when:
• A supplier payment hits earlier than expected
• A big customer delays payment
• You spot an opportunity you need to jump on quickly
• Seasonal dips happen and sales take a temporary hit
Think of it as your growth insurance. It means you can take calculated risks without betting the farmevery time.
Here's what we've learnedworking with dozens of growing ecommerce brands: generic accounting advice doesn't cut it. You need someone who gets the specific cash flow challenges of ecommerce inventory cycles, marketplace payments, ad spend timing, all of it.
Want to chat about your specific cash flow situation? We'd love to take a look at your numbers and spot some opportunities together. No pressure, just a friendly conversation about how to keep your growth sustainable.
Managing cash flow during growth isn't about pumping the brakes-it's about being strategic. With real-timevisibility, smart inventory management, and the right financial support, youcan scale sustainably without constantly worrying about running out of cash.
Growth is exciting. Let's makesure your cash flow keeps up with your ambitions.
