The CFO series: How FinTech can Help eCommerce Scalability.

The CFO series: How FinTech can Help eCommerce Scalability.

In the previous article, we talked about workflow automation and how real-time data is crucial for well-informed decisions, proving that up-to-date financial information is vital for a company’s strategic growth. This time, we want to focus on scalability and how FinTech can help eCommerce companies unlock liquidity.

Scaling Challenges in eCommerce.

For most eCommerce companies, scaling their business is a key strategy to reach different markets and regions, which is the very nature of eCommerce. 

To illustrate how eCommerce is growing worldwide, Shopify forecasts that by the end of 2024, online sales will account for 21.2% of all retail sales. 

And there is no growth without effective cash management.  Cash flow dynamics constantly shift, with seasonal sales fluctuations and ever-evolving market demands adding another layer of complexity.

Also, having liquidity—the availability of liquid assets such as cash— is a constant challenge for eCommerce companies. 

Being liquid means being equipped to capitalize on market opportunities swiftly and decisively. Yet, unlocking liquidity remains a hurdle, one that requires innovative financial solutions specifically designed for the cash flow patterns of digital commerce.

Balancing inventory, seasonal peaks, like Christmas and other holidays, bring high sales but not always enough immediate income to cover costs. Holding excess inventory ties up cash, while insufficient stock leads to lost sales. 

Marketing and Advertising Can Become a Hurdle for E-Commerce Liquidity.

eCommerce businesses are heavily invested in digital ads, especially on social media and Google Ads. Even with the introduction of AI in search engines, Google still has the search engine monopoly, making Google Ads the main source of ads online with over 80% of businesses using it.

When it comes to return on investment (ROI), Google Ads has a ROI of 200%, meaning businesses typically earn double what they spend. The average conversion rate for Google Ads is 3.75%, while social media effectiveness varies depending on the platform and campaign type.

These stats underline the critical role of digital advertising in e-commerce success. Businesses need to optimize their online ad strategies to maximize visibility and profitability in a competitive digital landscape.

This constant juggling act to maintain inventory, scale marketing during peaks, and manage cash flow fluctuations throughout the year can hinder growth and adaptation if sufficient liquidity isn't available.

And here is where FinTechs come in. 

Traditional Accounting Software Isn't Enough: The FinTech Advantage for eCommerce Scalability

Traditional accounting software offers valuable financial insights but often lacks features specifically designed for e-commerce challenges.  While some accounting solutions provide real-time data, they may not go as deep into areas like ad spend management or international sales optimization.

To address these limitations, the accounting software can automatically feed sales data to the FinTech platform. This data can then be used to generate more accurate financial insights for:

Unified Financial Dashboard:  By integrating with your accounting software, marketing platforms, inventory systems, and sales channels, FinTech platforms create a unified financial dashboard. This provides a comprehensive view of your entire business operation in one place. You can easily monitor key metrics like sales trends, inventory levels, marketing performance, and cash flow, all in real-time. 

As mentioned in the previous article, the FinTech platform offers these dashboard capabilities, which help eCommerce businesses gain clear insights into their finances and make data-driven decisions quickly.

Dynamic Credit Lines: By analyzing real-time sales data from your accounting software, fintech platforms can dynamically adjust your credit line limits. This means you have access to the exact amount of funding you need, based on your current sales volume. No more applying for extra loans during peak seasons or having leftover unused capital.

FinTechs like specialize in providing tailored financial services that streamline this process, helping eCommerce businesses efficiently manage their finances and swiftly capitalize on emerging opportunities.

Automated Approvals:  With real-time data feeding into the system, approvals for credit line increases become faster and more automated. This eliminates the need for lengthy paperwork and manual reviews, allowing you to access the funds you need quickly to maintain your business flow.

Streamlined Ad Spend Management:  FinTech platforms can integrate with your advertising platforms (e.g., Google Ads, Facebook Ads) to automatically track your ad spend against sales data. This provides valuable insights into which campaigns are performing well and which ones need optimization. You can then adjust your ad spend allocation strategically to maximize return on investment (ROI).

International Sales Optimization:  FinTech platforms may offer currency conversion tools and international payment processing solutions. This simplifies managing international sales transactions and reduces the risk of foreign exchange fluctuations impacting your profit margins.

Many leading FinTech providers offer smooth integration with popular accounting software solutions. These platforms often feature extensive app marketplaces where you can find integrations with a variety of financing options, including inventory financing, invoice factoring, and revenue-based financing. Similar functionalities are also available through the integration partners of other well-known accounting software providers.

The e-commerce landscape is constantly evolving, and so are the FinTech solutions available - and we hope this series has given you valuable insights, from the complexities of digital commerce to the importance of workflow automation and challenges for scalability

Staying informed about the latest trends and innovations will be crucial for CFOs to understand the complexities of digital commerce and ensure their businesses have the financial tools they need to thrive. So, don’t forget to subscribe to stay tuned!

Until next time!