Do you find yourself wondering how much of your Amazon payout should be set aside for your next inventory purchase? Are you struggling to keep track of upcoming supplier payments and upcoming credit card due dates? If these questions leave you scratching your head, it might be time to implement Profit First to take control of your cash flow.
Profit First isn’t a magic fix for all your financial worries, but it does empower you with knowledge. In the world of ecommerce and Amazon, adopting the Profit First cash flow model is a game-changer, offering a straightforward strategy with significant returns, especially when it comes to managing your inventory cash flow. Here’s a quick guide to getting started:
Create Dedicated Accounts
Most sellers operate with a single checking account where inventory and operating expenses mingle, making it challenging to track funds for specific purposes. By setting up separate accounts, such as one for inventory and another for operating expenses, you gain clarity and control over your finances.
Allocate Funds Strategically
For retail arbitrage or online arbitrage sellers who use credit cards for inventory purchases, designating a specific credit card solely for inventory transactions is helpful. This allows you to earn rewards while extending payment terms, all while ensuring you have the necessary funds reserved in your bank account.
Manage Credit Card Usage
Separate your credit cards based on designated purposes, just as you’ve organized your bank accounts. Throughout the month, monitor charges against available funds to avoid accumulating debt that could signal underlying issues with your business’s financial health.
Cover All Inventory-Related Costs
Your inventory account isn’t just for purchasing goods—it should also cover associated expenses like prep center fees, shipping, and packaging. Set aside funds from each Amazon payout to anticipate these costs for upcoming orders.
Embrace Profit First
In addition to inventory and operating accounts, establish a profit savings account. Allocate a small percentage of each payout into this account, reinforcing the habit of prioritizing profit in your financial strategy.
By implementing this approach, you’ll lay a solid foundation for Profit First principles. You can find more detailed guidance on cash flow management tailored to ecommerce, in my book, Profit First for Ecommerce Sellers. If you encounter challenges setting up accounts, refer to a list of Profit First-friendly banks to streamline the process.
Take charge of your inventory management and reclaim those sleepless nights from the inventory monster. With Profit First, you can turn financial uncertainty into informed decision-making and sustainable growth. If you need help, we are here for you. Reach out to the bookskeep Team today!
If your ecommerce business isn’t where you’d like it to be in terms of profitability, check out my book, Profit First for Ecommerce Sellers. It answers important questions about how to implement Profit First in an ecommerce business. Take control of your money and your business, and put Profit First to work for you!
You can also sign up for the Profit First for Ecommerce Sellers Online Course. As a Mastery Level, Certified Profit First Professional, I will teach you why Profit First works so well for ecommerce businesses and the particular challenges for businesses that have physical products requiring inventory management. You will learn how your behavior drives your money management habits for your business and how you can set up your business bank accounts to work with your habits.
Check out all our ecommerce accounting and profit advising services here!
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