This Cash Flow Mistake is Killing Your Business...

Apr 15, 2025

Discover the cash flow mistakes that can derail e-commerce businesses, particularly in managing inventory and forecasting. Explore the crucial differences between direct-to-consumer and wholesale strategies, and learn the importance of accurate COGS calculation. Uncover the complexities of receivables in wholesale, the risks of payment delays, and how to strategically choose between debt and equity financing. Gain insights on adapting to sales volatility driven by viral social media trends, and the vital role of organic marketing in today's landscape.

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ANECDOTE

Abir’s E-Commerce Transformation

Abir shared his journey from a finance VP to an immersed e-commerce operator managing ads and customer service himself.
This hands-on experience shaped his focus on specialized e-commerce financial services through UpCounting.

INSIGHT

Separate Channels as Businesses

Treat DTC, wholesale, and Amazon as separate businesses due to differing cost structures and cash cycles.
Each channel requires unique strategies in marketing, inventory, and financial management to succeed.

ADVICE

Segment Costs by Channel

Separate revenue and COGS by channel to understand contribution margin and fixed cost coverage.
Assign variable costs like commissions and shipping to channels for clearer financial insights.

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💲 Upcounting - Unlock your eCommerce brand’s massive growth! UpCounting scales your business by bringing diverse expertise under one roof, saving you time and avoiding the pitfalls of outsourcing to multiple companies🔗 https://www.upcounting.com/💰 Channel Segmentation: Treat each sales channel (DTC, wholesale, Amazon) as a separate business unit with distinct financial characteristics, including cost structures, cash conversion cycles, and marketing strategies.📊 Accurate COGS: Regularly reconcile accounting COGS with actual inventory costs to prevent miscalculations that can significantly impact profitability and decision-making.⏰ Cash Flow Forecasting: Implement a weekly cash flow forecast to anticipate shortfalls, plan for investments, and make informed decisions about marketing spend and inventory management.🤝 Receivables Management: Understand the complexities of managing receivables, especially in wholesale, to avoid delays and potential cash flow crunches. Proactive communication and monitoring are crucial.⚖️ Debt vs. Equity: Carefully weigh the pros and cons of debt and equity financing based on the specific use case, cost of capital, risk tolerance, and long-term strategic goals. Short-term needs might favor debt, while longer-term, riskier ventures might justify equity.0:00 - Intro1:36 - Abir's background in e-commerce4:05 - Understanding different channel strategies6:40 - Cash conversion cycles in DTC12:05 - Delayed cash flow in wholesale15:06 - Managing additional costs and pricing19:21 - Disconnect between accrual profit and cash flow22:59 - Daily performance tracking in e-commerce26:41 - Unpredictability of inventory management in DTC30:31 - Impact of cash conversion cycles on profitability33:18 - Strategic debt management34:40 - Brands having "skin in the game" for better engagement37:18 - Understanding marketing metrics for profitability39:02 - Initial mistakes in CAC management41:03 - Thresholds for customer acquisition to ensure sustainable growth46:10 - Planning ahead and understanding core metrics49:02 - Building reliable forecasts for financial health51:22 - Balance between organic growth and paid advertising strategies55:11 - Impact of viral moments on brand awareness and marketing effectiveness59:22 - Testing different channels for effective customer engagement and growth1:01:54 - Final chewFollow us, subscribe to our newsletter, and to see our exclusive merch check outhttps://chewonthis.io/Ron Shah - https://twitter.com/obviceoAsh Melwani - https://twitter.com/ashvinmelwaniChew On This - https://twitter.com/chewonthisdtc