The biggest challenge for online retailers isn't always coming up with a better mousetrap. Success often comes down to overcoming financial obstacles.

Eddie Davis, online retailers

Eddie Davis, vice president of business development for FINSYNC Inc.

Online businesses have never been in a better position for growth—nor have they faced as much competition. Consumers armed with mobile devices that make it simple to buy everything from an airline ticket to groceries with a couple of taps on a touchscreen are increasingly purchasing goods and services online.


U.S. ecommerce revenue is projected to climb to around $565 billion by 2023, an increase of 54% from a projected $365 billion this year, according to market and consumer data provider Statista.



More companies are springing up every day with sophisticated websites and mobile apps aimed at grabbing a bigger slice of the online retail market. However, the biggest challenge for online retailers eager to cut through the crowded marketplace isn’t always a question of coming up with a better mousetrap. It often comes down to financial obstacles.


An ambitious ecommerce platform redesign, adding more employees or investing in more storage and logistics require that businesses have their financial house in order. 


Fortunately, there are strategies that online retailers of any size can adopt to efficiently manage cash flow, minimize operating expenses and improve financial flexibility to best position their business to take advantage of the growing ecommerce market. 



Here are three ways online retailers can position themselves for growth in 2020 and beyond:


Tune up your cash flow management


Managing your cash flow is essential to keeping your business profitable. You can do this much more effectively by using software that links the transactions related to all of your business’ financial tasks, such as invoicing customers, making payments and processing payroll.



Such systems optimize your accounts receivable and accounts payable processes to ensure that your bank balance is sufficient to fund significant expenses. Cash flow management is key to avoiding potential problems that could leave you scrambling for funds to cover payroll, for example.


Relying on more accurate cash flow forecasting can help online retailers gauge how much they can spend to beef up staffing during a critical period, such as the holiday shopping season.



Invoice timing is another way to help manage your cash flow effectively. The idea is to send out invoices to your customers on a set schedule so that you can receive payment on time and avoid a critical cash crunch.


If you use an integrated cash flow management platform, one can set up this process to happen automatically, along with payment reminders to notify customers that they’re past due.


Sometimes customers don’t pay on time, making it tougher for businesses to meet their funding needs. Still, there are new financial services that can offer businesses more financial flexibility in such situations.



While it’s not unusual for businesses to use credit to cover expenses, the use of credit cards is generally limited as the recipient needs to have a merchant account to process card payments.


Fortunately, this is changing, which opens the door for businesses to cover cash-only expenses with a credit card. And payments can be set up via email without the need to reveal credit card account numbers or other information, which minimizes identity fraud risk.



Automate back-office tasks


Another advantage of syncing up your financial accounts with an integrated platform is that it makes it easy to automate a variety of back-office tasks, including paying bills and processing payroll. That saves you time to focus on more important aspects of your online business.


Inaccurate financial tracking can lead to unnecessary costs and undermine your ability to plan for next month and beyond.



Consider how you process payroll. Still using paper time cards to track the hours that your employees work, or spending time entering the data into a payroll spreadsheet? This is a good way to allow errors to creep into your accounting, which can lead to problems when it comes time to cut paychecks that comply with tax withholding requirements.


The automation approach simplifies the payroll process because it can a business can use it to track the hours that employees work, freeing it of the data entry associated with physical methods of keeping tabs on employee work hours. It also consistently generates correct paychecks that are in compliance with tax laws, which can help give you a more accurate tally of your labor costs.


Consider alternative financing



Even when you do your best to manage your cash flow, there will be times when your business will need to seek funds elsewhere to expand to new facilities or polish up your website or mobile app. Part of being a successful online retailer is doing what it takes to accommodate demands for more product or higher server traffic.


Here’s where a business owner with constrained cash flow and credit might hit a wall. The solution is an infusion of capital to cover the costs that will set your business up for more growth. Traditionally, that means going to a bank for a loan or line of credit, but the application process can be complicated, and often leads to rejection, especially for smaller businesses.


Conventional lenders typically deny small business loans due to low credit score, not enough collateral, insufficient credit history, weak business performance, and too much debt, according to the Federal Reserve.



Online lenders may offer a better alternative as they leverage financial data and process applications much more rapidly than traditional financial institutions. These alternative lenders will also look beyond a business owner’s personal credit history when sizing up creditworthiness and focus instead on the company’s monthly revenue track record.


Many factors go into staying competitive in the online retail business. The last thing you want is inefficient, poorly executed financial and back-office operations that hamper your growth.



Make changes now and you’ll set your business up for even bigger things next year.


Eddie Davis is vice president of business development for FINSYNC Inc., a cash flow management platform.