Effective Ecommerce Cash Management During High Sales Periods

Ecommerce Cash Management

Have you experienced a surge in sales during the holiday season? If so, how did you handle your cash flow? During periods of rapid growth in your business, it can be easy to get caught up in the excitement of increased sales and the accompanying challenges.

Perhaps you had to make strategic shifts in your business operations to adapt to these changes. Regardless of the circumstances, managing your finances effectively is crucial. With the upcoming holiday season just around the corner, it’s a good time to establish some financial guidelines.

Determine Your Financial Setpoint

The key to managing your finances during high sales periods is to focus on your operating expenses. When your sales are booming, you’ll likely see more cash flowing into your business accounts. It’s essential to avoid letting your checking account balance grow beyond a typical monthly setpoint. Your setpoint represents the balance you aim to maintain in your account.

Consider that many of your monthly expenses remain consistent, such as rent, utilities, insurance, and software subscriptions. These costs don’t fluctuate with the seasons. Therefore, you can estimate your setpoint based on your previous months’ expenses.

The reason for keeping your balance in check is to maintain financial discipline. When your bank balance starts to swell, there’s a risk of becoming less cautious, efficient, and innovative. During stressful times, the temptation to overspend can be high. To stay focused, it’s wise to move any excess funds into a savings account.

Take Action

Take a moment to review your past three months’ operating costs. Let’s say your typical monthly expenses total $25,000. This becomes your setpoint—a one-month reserve in your checking account. As you receive deposits from your sales, ensure that any amount exceeding $25,000 is transferred into your savings account.

If you follow the Profit First cash flow methodology, allocate your deposits based on your usual percentages. Then, any balance exceeding the $25,000 setpoint should be moved to your profit account.

For those not using Profit First, consider opening a dedicated business savings account or using an existing one to hold these surplus funds. Essentially, any deposit into your operating checking account that surpasses your setpoint should be redirected to the savings account.

Simple Steps, Significant Results

By consistently moving excess funds to your savings account, you’ll resist the temptation to spend them impulsively. This practice will help you build a healthy financial reserve that can be strategically deployed once the holiday rush subsides and you have time to evaluate your options.

For instance, you might use this reserve to grow your inventory, launch new products, establish an emergency fund, or reduce business debt. The key is to make informed decisions when you’re not under immense pressure during the busy season.

A surge of sales is exciting for any business owner, but effective cash management during high sales periods needs to remain your focus. By setting a financial setpoint, taking deliberate actions to adhere to it, and making prudent decisions with your surplus funds when the time is right, you’ll ensure the financial stability and growth of your business.

If you need help managing all that extra business growth and income, bookskeep can help! Reach out to the team today!

Post Author Cyndi Thomason

Cyndi Thomason

Cyndi Thomason is founder and president of bookskeep, a U.S.-based accounting, bookkeeping, and advisory firm for ecommerce sellers worldwide. She has a passion for data analysis and process development. She uses that passion to educate her clients and help them structure their businesses to maximize profits.

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