Introduction

In the fast-paced world of e-commerce, staying ahead of the competition requires more than just a great product or a slick website—it demands astute financial management and strategic planning. At the heart of this challenge is the need for real-time financial data. Real-time financials empower e-commerce businesses to make informed decisions regarding inventory purchases, advertising strategies, and overall financial planning. But how can this be used in practice?

Read on to see how Mark at Mark’s Organic Cocktail Mixes uses real time financials to increase sales and decrease expenses for his Shopify store.

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Increasing Sales

Manage Inventory Effectively

Effective inventory management is vital for e-commerce success. Overstocking can lead to unnecessary storage costs and tied-up capital, while understocking can result in lost sales and dissatisfied customers. Real-time financials provide a clear picture of cash flow and product turnover rates, helping businesses make informed decisions about when and how much to restock.

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Real Time Financials: By carefully monitoring his financials in real time during the lead-up to the summer season, Mark noticed a faster than expected depletion of his flagship product, his Spicy Margarita Mix. This insight allowed him to quickly reorder stock, avoiding potential lost sales and capitalizing on the seasonal demand spike.

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Lagging Financials:  Mark waited until the following month to review the financial information provided by his accountant, to find that his Spicy Margarita Mix was selling through quicker than anticipated and was actually out of stock. By the time Mark reordered his mix, the most profitable summer season was over and he had missed out on thousands of dollars of sales.

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Advertise Successfully with Up to Date ROI

Advertising is one of the largest and most important expenses for e-commerce businesses, making it critical to ensure that every dollar spent contributes to growth. Real-time financials allow sellers to monitor the ROI of their advertising campaigns as they happen, adjusting strategies to maximize effectiveness and reduce lost dollars.

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Real Time Financials:  Leading up to the summer season, Mark launched a series of online ad campaigns across different platforms. By analyzing real-time click through rates, he quickly identified which platforms were generating the highest returns. This enabled him to reallocate his budget towards the more profitable channels, significantly increasing his sales and profitability.

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Lagging Financials:  Mark set up his Facebook and Google campaigns at the beginning of the month and reviewed the financial data provided by his accountant 15 days post month end. He realized that while his Facebook campaign was converting well, his Google campaign had missed the mark and he had spent thousands of dollars unnecessarily in this channel, hurting his sales and profitability.

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Manage Cash Flow Efficiently

In e-commerce, cash is king. Having access to real time financial information and one place to track your cash flow is a necessity to understand when to pay bills, when to take dividends and when a business may need to apply for outside financing.

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Real time financials:  Mark received a large invoice from his supplier and was unsure when he would have the adequate cash on hand to pay it. Using a platform that tracked his daily cash levels, Mark was able to set an alert for when he was above a certain cash threshold. He then was able to pay his supplier on time, receive his inventory and restock his mixes, leading to more sales.

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Lagging financials:  Mark did not have a consolidated view of his cash levels at any point in time during the month and subsequently missed his invoice payment date. He had to ask his vendor for an extension and was late receiving his inventory, missing valuable sales opportunities.

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Access Capital Quickly and Easily

Running an e-commerce business is incredibly capital intensive. Sellers face numerous upfront expenses, including ordering inventory and paying for advertising, before receiving any cash. To bridge this working capital gap, many sellers apply for some sort of outside financing to help them scale and grow their businesses.

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Real Time Financials:  Mark received a large PO from his dream retailer. He needed capital in order to fulfill the order and started to look for outside sources of financing. When applying for a loan, his financing provider requested to see his historical financial statements, which Mark had quickly and easily accessible. Mark was able to access the funding in time to fulfill the PO and was able to see his product hit the shelves.

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Lagging Financials:  Mark started looking for outside financing and upon finding a provider, was asked to provide his historical financial information and forward projections. Mark worked with his accountant for several weeks to get the necessary information in order. By the time Mark completed his financial package, he had missed the PO completion window and the retailer withdrew their order.

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Decrease Expenses

Actively Monitoring Your Expenses

By only getting financial information once monthly, an e-commerce merchant has no central way to audit how much money is being spent by them or by their employees throughout the month. This can lead to: subscriptions that are still being paid for that are outdated, incorrect charges by vendors, huge auto draws from advertisers and incorrect payouts from revenue channels.

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Real Time Financials:  Mark noticed that his shipping expenses were trending higher month over month. Upon contacting his 3PL, the provider noted that he had upgraded Mark to a new shipping plan. By catching this mistake early, Mark was able to keep his shipping expenses at bay.

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Lagging Financials:  Mark waited until past the end of the month to review the financial information from his accountant, to find that his 3PL provider had billed him thousands of dollars extra. By the time Mark spoke to his 3PL provider about the charge, it was too late to get a refund.

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Conclusion

The importance of real-time financial data in e-commerce cannot be overstated. It empowers businesses to make faster, more informed decisions, optimize inventory management, allocate advertising spend more effectively, manage their cash flows, access capital easily and minimize their expenses. In today's digital age, the ability to adapt and respond to financial information in real time can be the difference between thriving and merely surviving.

As the examples above show, whether you're a small start-up or a sprawling online marketplace, real-time financials are not just a luxury—they're a necessity for sustained growth and success in the competitive e-commerce landscape.

To get a competitive edge, contact us at DayZero to get started.

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