The eCommerce cash flow cycle

Reading Time: 3 mins

Cash flow is more important than profit. Especially in the early days of your business. You can be profitable in the short term, but if you don’t have sufficient cash flow to keep the wheels moving then you might hit a bump in the road. 

This is why it’s essential to have a firm grasp of the typical eCommerce cash flow cycle.

Understanding the cycle and creating a robust financial forecast accordingly, tailored to your specific business’s circumstances, will give you the foresight ability to plan for when you might make losses and give you the confidence to run sales, make investments, and seek out appropriate financial backing - which will ultimately give you a competitive advantage over your competition. 

This is typically how the cash flow cycle looks for an eCommerce clothing brand.


You’re rich baby! January is stereotypically a cash-heavy month off the back of huge sale months (November and December). You’re cash-rich but product poor. If you're a clothing brand and or sell seasonal products, you’ll be putting down payments for your spring collection.


You’ve had a great Q4 (hopefully), but now it’s time to pay the tax man. You get a hefty Q4 tax bill. You’ve got more Spring collection payments. You’ve got negative cash flow. But remember, that’s not always a bad thing as long as it’s managed correctly. This is usually one of the toughest cash flow months. 


Your Spring collection just dropped and you get a nice sales bump. Cash flow is starting to look good again. But you’ve got a final Spring payment to contend with as well as you’re first Summer drop payment to contend with. Cash stocks from the Spring collection should cover this. 


Your Spring sales are ticking over nicely. You might even consider a restock. Usually, this would be a cash flow-positive month for eCommerce brands. 


April was a good month for cash flow, depending on how good could be a different story for this month. You’ve got your first Summer collection payments to contend with, coupled with a Q1 VAT bill. This month you’re cash flow neutral/negative. You might need to cut back on unessential spending to mitigate the low cash flow this month. 


Summer is here, and so are Summer sales. Usually, a nice cash builder for the coming months.


It’s that time again. Q2 tax bill is here. You’re still getting decent sales, but now it’s time to start thinking about getting Black Friday/Cyber Monday orders ready - arguably the most important point in any eCommerce brand owner's calendar.


You have your first down payment for BF/CM which can take a big toll on your cash flow. However, sales are still chugging along at a decent pace. This is typically a neutral/negative cash flow month. 


This is all about building momentum to Q4, keeping up those sales, building those cash stocks and preparing for what's to come in the next 3 months. 


You’re putting through your final BF/CM order, continuing to build cash for November. 


BF/CM is here… but so is your Q3 VAT bill. AND you’ve got increased ad spend due to more competition and more brands fighting for that vital ad space. Remember, if you’ve been building hype for your BF/CM sales, people might be hesitant to buy throughout the month as they know they could miss out on getting the same item much cheaper in the sales. More often than not, you’ve got a nice cash injection at the end of the month. You’re cash positive. 


It’s gifting season. This is usually another good eCommerce sales month. Any excess stock from BF/CM you try and sell Christmas/Boxing day sales. You’re rich again! Now you better get planning to do it all again next year.

Now what?

Planning your ecommerce marketing calendar

Now you have a general idea of how you’re typical cash flow cycle might look, you can start to plan for any sales or marketing activities around key dates in the eCommerce calendar (and when you might need to stock up for them). 

As a little gift to you, the reader, we’ve created a helpful graphic to help you plan for this.

Image showing the typical ecommerce marketing calendar

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