Cash flow is the movement of money into or out of a business. It is one of the most important metrics when running your business. Without a healthy cash flow, growing an Amazon business can be incredibly difficult. It can affect your payments to suppliers and employees, as well as, impact the quality of your inventory. On the other hand, a steady cash flow allows you to have extra resources to grow and expand.
How does inventory affects your cash flow?
In most situations, your cash flow depends on your inventory. You spend money to buy goods for your inventory, and when those goods are sold, they bring back the money you spent.
On the contrary, your cash flow diminishes when your inventory is mismanaged. Problems with overstocking and less customer orders can lead to reduced sales, which then damages your cash flow.
To avoid hurting your cash flow and facing financial casualties in your business, here are different ways on how to manage you inventory to improve cash flow.
Keep track of your inventory
By tracking your inventory, you become more aware of its condition and status. You know when and how many products you need to stock. You also know how much of your products will sell. A good understanding of your inventory allows you to come up with an immediate solution when a problem arises. Thus, you can easily avoid hurting your cash flow.
Avoid buying products that do not sell
Having an accurate picture of your inventory enables you to easily process the amount of orders you can fill, and therefore prevents you from overstocking your inventory. Buying items that are least likely to generate income can only harm your cash flow. This is because you’re investing on products that don’t yield financial returns. That said, it would be a good idea to order small amounts of supply so you have room to adjust your inventory if demand ch