Positioning Your Amazon Business for Increased Cash Flow
by Susan Tam
The basic desire of any business entrepreneur is to make sales, grow and generate as much income as possible. Being able to manage your business cash flow is crucial to being a successful Amazon entrepreneur. As consumers want to find their products in the most convenient and fastest way possible, the popularity and rise of online marketplaces like Amazon, eBay, Etsy and many others are taking out retail giants in malls. The sales cycle of a product in an online marketplace is much faster than traditional brick and mortar retail stores, which means that online sellers need to have the cash on hand to replenish inventory.
However, there are significant differences in the seller policies of each online marketplace from eBay to Etsy, compared to Amazon. For example, while eBay sells products through the auction or bidding method, products on Amazon have their prices fixed, and so on. No matter the policies in place, an online marketplace seller’s desire to increase cash flow to help their business grow and generate more earnings remains unchanged. As an online seller taking advantage of this phenomenon, you will need to be prepared to handle the sales growth and know what to do if mass revenue is coming in.
Having Cash Now vs. Waiting for Later
One major way you can increase cash flow for your Amazon business is by constantly putting earnings back into inventory purchase, but this is a challenge. Unlike eBay sellers who get paid daily from PayPal, Amazon holds sellers’ accrued funds for up to 14 days, and possibly much longer for vendors, even up to 90 days, depending upon the contract negotiated.
Waiting for up to 30 days to get paid could cause a backup in inventory and result in a decrease in sales and possible out-of-stock items. You are not getting funds immediately from PayPal or cash to purchase new items to sell. When you have to wait for cash, selling products can result in slow sales as you can only have items listed that you can afford to buy. Also, once you run out of the product, it will take time to get the listing back up, increase impressions and appear in Amazon search results.
How to Position Your Amazon Business for Increased Cash Flow
Establishing a Monthly Budget for Inventory
As you start to increase in sales, increase and adjust your budget.
- Maintain a monthly budget for expenses and operations. Focus on investing your profits from Amazon sales in “inventory.” Once you start making money, don’t go and buy items for your house, a lake vacation or immediately hire a team of new employees. Instead, focus on the strategy of how you will manage and grow your business to determine what you actually need.
- Having foreknowledge of how Amazon operates, as a prudent seller you should factor this situation into budgeting for your business. While you allocate money for inventories and other business-related expenses, funds should also be kept aside to cover for the days when Amazon keeps funds pending up to 14 days for sellers and as many as 90 days for vendors.
Speed is the Key: Selling Inventory Faster
Here are 5 tips to get your products out the door faster for sales growth.
- Keep products in stock. Time your inventory purchases to avoid having a stockout.
- Expedite shipments to customers: Be sure to mark items as shipped and have the tracking number (if applicable) associated with the product.
- Respond to customer inquiries immediately; review and verify shipment dates. Send emails after your shipment is delivered for reviews of your products.
- Work with the right wholesaler or supplier to get the best terms and pricing to replenish inventory quickly.
- Have enough cash flow. To replenish inventory to buy more products, consider invoice factoring, loans, Amazon lending or credit cards.
Use Invoice Factoring for Daily Cash Flow
Many sellers may not know you can turn your sales into cash without delay. It has become customary for Amazon to withhold the funds paid to sellers for up to 14 days, making it difficult for sellers to access funds for restocking inventory and paying expenses that are crucial to growing their business.
Sellers should seek alternative routes to accessing their funds. One way to do this is through the historical use of invoice factoring.
Invoice factoring is simple. You agree to have your factoring company buy the accounts receivables from your services or sales listed on the invoice. The factoring company in turn gives you the cash in exchange for the accounts receivables, which you can get the next day rather than having to wait weeks to get paid. Factoring enables sellers on the Amazon marketplace to have quick access to a huge percentage of their sales.
Have Other Sales Streams
Don’t just consider one channel of selling your products. You may find success and feel comfortable on one channel through the online marketplace, but don’t put all your eggs in one basket. Consider web stores, brick and mortar stores and industry trade shows/fairs. According to one survey, 73% of Amazon sellers are also on eBay.
Having other sources of income provides sellers with the safest alternative to keep their business on Amazon growing instead of relying on one channel to keep the business afloat.
Consider Short-term Loans
Short-term loans help merchants avoid higher interests and accelerate pay back times to help keep the business afloat and increase cash flow. However, only consider borrowing when all other options have fallen through. Read more on ways to improve cash flow.
Sellers often buy wholesale products on credit cards to help accumulate points for rewards redemptions, but think about the high interest rates if you carry a balance.
What have you done with your Amazon business to increase cash flow? Please share your experience with us with #getpayability or send story to email@example.com.
Get Your Cash Flow Moving with Payability
With Payability, you can speed up payments and get paid out daily for your Amazon sales. You get paid quicker, so you have enough cash flow to buy more inventory. No more waiting for Amazon to pay you up to 2 weeks and losing money for out-of-stock items. Take advantage of daily payments and learn more at Payability.
Originally published on May 22, 2017, updated August 12, 2019
This post is accurate as of the date of publication. Some features and information may have changed due to product updates or Amazon policy changes.