What do you need to keep growing your Amazon business? Great products, more inventory, five-star reviews—of course! All of the above. But you also need cash in the bank. Not cash tied up in inventory. Not cash tied up in Amazon’s payout cycle. You need money that can be used for product launches and growth.
If you have complete visibility of your Amazon seller cash flow, you have the ability to plan your growth. You can plan month-by-month, product-by-product, and order-by-order.
But it’s not easy to track and forecast your cash flow, especially if you live in Seller Central. So let’s take a look at the gaps that exist, how to fill them, and what actions you can take with a complete understanding of your cash flow. This will allow you to answer the following questions:
- How many products can you afford to launch?
- How will you afford your growth?
- How much can you pay yourself?
This post will help you answer those questions, and we’ll start with understanding your cash.
Where’s my cash?
Amazon is excellent at showing your sales. But it’s not easy to see how much they keep, and it definitely won’t provide context for your expenses outside of Amazon. So, it’s difficult to see your profit and impossible to see your cash flow through Amazon Seller Central.
Even once you account for Amazon fees, ads, and unsellable returns, there are still a number of blind spots. Your non-Amazon expenses include:
- COGS (cost of goods sold)
- Product launches (photography, social media ads, influencer marketing)
- PPC (outside of Amazon)
- Your salary
- Bank fees and interest
The list goes on. All of this impacts your bottom line and your cash flow. In order to plan for growth opportunities, you need a way to account for all of this.
So, how do Amazon sellers currently do it?
How to track and forecast your cash flow
In a recent Viably webinar, 55% of sellers in the audience track this data manually in spreadsheets. Perhaps the image below looks similar to your current strategy.
When your business is small, this spreadsheet could do the job. But it’s a lot of work, and it only gets more cumbersome as you grow. It’s also very reactive – you’re tracking activities that have already happened, but you’re not planning product launches and restocks with a view of your future cash flow.
It also provides a view of your future cash flow that is responsive to product launches and large inventory orders that you’d like to execute.
So, back to our initial questions.
How many products can you afford to launch? Map it out.
The goal for any Amazon seller is to remove the guesswork as they introduce new products and revenue streams. This allows you to clearly map out plans with suppliers, and invest confidently in ways that you know you can afford. Most importantly, it accounts for all of your business financials, inside and outside of Amazon.
Generating more cash flow
Even with a complete understanding of your Amazon seller cash flow, the reality is that many Amazon sellers struggle to generate enough of it. While many sellers invest 100% of profits back into the business, it can still be difficult to generate enough cash to maximize busy seasons.
In other words, a detailed view of your cash flow forecast won’t (by itself) give you the cash you need to place a large order from your supplier ahead of the holidays. So, how do you afford your growth?
If you can anticipate how much cash you’ll need to hit your goals, you can prepare. Maybe you rearrange your expenses, or maybe you fill the cash flow gaps with funding. If your plans will put you into the red, or negative cash flow (like the image above), it doesn’t mean you can’t execute them. It might be a perfect opportunity to leverage outside capital to maximize your growth.
And finally: how much can you pay yourself? Many sellers would like to pay themselves from their Amazon business, but they don’t know how much they can afford. The best way to figure it out is to map out your potential salary according to cash flow, and see how it impacts your plans for launches and restocks.
If you’re looking for a better way to track and forecast your cash, sign up for Viably for free and connect your accounts.