Healthy cash flow is essential for the growth of your online business. It follows a chain reaction where if your customers delay their payment, you will have to delay your payments to the employees and suppliers. And, if you can’t pay your employees and suppliers, there will be no one to operate the business, and most importantly, there will be no inventory. You should always try to have a positive operating cash flow to grow and expand your company resources. The best way to achieve that goal is through inventory management.
Importance Of Inventory On Cash Flow
Thousands of online companies are making the most of web development platforms that allow them to create and set up their store directly from that website. Among those, Shopify is widely considered as one of the successful software solutions, that enables anyone to sell their products online. This platform has also allowed business owners to forecast and manage their cash flow at regular intervals. You can create a cash flow statement according to the inventory and track it on a weekly or a monthly basis.
Some of the ways to manage inventory that results in better cash flow are as follows:
Stocking Up Your Supply
The tools in Shopify will help manage inventory according to your timelines. This eliminates the chances of miscalculating the supply. You need to track the incoming and outgoing of your inventory to know the number of products you should stock. There should be a balance in the demand and the stock of products you have in your inventory. If the supply is high, it can hurt your cash flow as there will be more expenditure. This will also increase the cost of goods as you will buy and store more inventories. On the other hand, if the subsequent demand for the products is not matching the rate at which you are stocking the products, it will create a negative cash flow.
Don’t Let Order Issues Hurt Your Cash Flow
Another reason why proper inventory management for Shopify is essential is that, if neglected, it may lead order issues, and hence, customer dissatisfaction. This also supports the theory that the better the inventory management, the better the cash flow and vice-versa. With the right tracking tools, you can update your supply and track your inventory accurately. If you have fewer products than the market demands, you can either cancel the order or delay the delivery of the order to avoid customer dissatisfaction.
Backtracking Inventory Issues
The best way to deal with inventory and cash flow is by identifying the mistakes in your previous inventory management practices. If you can track the orders, where items did not arrive on time, were canceled, or had lengthy turnaround times, you will be able to bypass these problems in the future using proper inventory management tools. Managing a business isn’t easy, but there are enough online tools out there that can help with inventory management and improve the cash flow of your business.
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