The COVID-19 situation has impacted everyone in one way or another. Many of us are considering what to do immediately and then next after that. In other words, what’s the plan? The short answer is get good control of your cash. We’ve created a comprehensive guide as a checklist. You can access it here. Here are a few steps to get you started in this article about what to do with your ecommerce business in uncertain times.
What To Do with Your Ecommerce Business in Uncertain Times
A Few Things First
To begin with, you must know your numbers:
- Determine what your cash run rate is; meaning the number of months you can operate with no sales. This is your cash buffer.
- You also need to know the level of income you need to take care of yourself and your family. This is important. Don’t convince yourself that you can’t or shouldn’t take Owner’s Pay right now because you need the money back in the business. This mindset will set you up for even greater problems. Use our Owner Pay Calculator here.
- Diligently track your expenses associated with COVID 19 by creating a separate general ledger account. These expenses may be reimbursable later and it will help explain variations in spending on your financials.
Build a 13–Week Cash Flow Model
In addition to understanding your cash buffer, you need to project what your upcoming cash flow will look like. We use a 13-week cash flow model to create various scenarios with our clients. The model is created by reviewing a typical month and using what you understand about the economy now to project the future going forward. Once created, you can duplicate and model changes in income and expenses based on best- and worst-case scenarios. What we are trying to determine is, am I going to run out of cash? If so, when. Then you can put your entrepreneurial spirit to work and solve that issue. We currently don’t have enough data to know how this will play out, so make a plan, monitor it and as the data becomes available, adjust.
Next Wednesday, April 1, we are teaming up with A2X to offer a webinar on building a 13-Week Cash Flow plan. Please join us if you’d like to learn more about this approach.
We’re in This Together, and bookskeep is Here to Help with your Ecommerce Accounting
One thing I’ve learned throughout my business and my personal life is that the one thing you can count on is that the unexpected will happen. It just will. It just did. How you navigate the unexpected can be a little easier if you are prepared. Create your 13-week plan and track and adjust the plan every day until things are more settled. This data will give you confidence in the steps you’re taking to manage your business. Be well, stay healthy. And let me know how I can help!
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! Contact bookskeep today to learn more about ecommerce bookkeeping.