Craft a Financial Plan for Your E-commerce Business: A Step-by-Step Guide

E-commerce businesses face several challenges in today’s economy. The current cost of borrowing is high, competition is fierce, and the global supply chain can still be unpredictable. Factor in the often-seasonal nature of e-commerce businesses, which typically conduct the bulk of their sales around the holidays, and the reality is clear: financial planning is more important than ever. Crafting a solid financial plan is not a luxury but rather a necessity.

To achieve success and stand apart from the pack, e-commerce business leaders must focus on a variety of strategies, such as planning inventory levels and purchasing early in the year, when sales are typically at their lowest, to ensure sufficient inventory to last through the holiday frenzy. This requires additional planning to help ensure gross margins are right and that your business retains enough cash on hand to fund those early inventory purchases.

While steady income all year long may not be realistic, a few simple but meaningful steps can help e-commerce businesses establish a financial planning process that will serve them for years to come and help them make smart fiscal decisions.

Step One: Start with Goals

As with any forward-thinking enterprise, e-commerce business leaders should identify the goals they want to achieve in the upcoming year. Perhaps you are aiming for higher margins or the launch of a new suite of products. Maybe your business wants to strengthen its supply chain by securing new suppliers. Other goals like establishing new marketing channels (“Maybe 2025 is the year to pursue marketing via influencers!”) require a clear financial commitment.

In addition to identifying crucial goals, leaders should know exactly how to track them. Determine the key performance indicators (KPIs) and objectives and key results (OKRs) that best align with the goals you set. Once you establish your goals and associated metrics for tracking them, you can incorporate these changes into the 2025 financial plan.

Step Two: Create a Budget

To achieve the goals you established in Step One, allocate the necessary resources. Look ahead to 2025 and build a forecast of your finances. Collaborating with a business advisory service with experience in digital commerce can be a gamechanger here. The right advisor can help e-commerce business leaders review past budgets and performance with a fine-toothed comb to identify missed opportunities, unrealistic goals or underutilized resources.

Leaders should also consider such factors as industry trends, consumer preferences, and potential tax and regulatory changes. For example, on the heels of the U.S. election, recently approved measures, whether local, regional or federal, can impact the cost of conducting e-business next year. A sophisticated business advisory service can also help e-commerce enterprises understand the impact of new legislation on their day-to-day operations and bottom line.

Step Three: Build a Cashflow Forecast

With realistic goals and a smart budget in hand, e-commerce leaders should next turn to building a cashflow forecast. A cashflow forecast is a financial projection to estimate the amount of cash a business expects to bring in and pay out over a future period. The forecast is typically broken down on a monthly, quarterly or annual basis, depending on business needs, and helps predict cash surpluses or shortages.

To build a useful forecast, leverage the budget to identify how much cash your business anticipates having on hand at a given point in time. For receivables, consider typical payment terms and past customer payment behavior to predict when cash will actually be received. Additionally, consider adding a buffer for unexpected costs or delays in payments. For example, receivables may include large wholesalers who can take a long time to pay, and payables may include large inventory orders that need to be paid in advance, causing stressors on your cash balance. Consider creating best-case, worst-case, and most-likely scenarios to understand potential cash positions and how your business will navigate each.

Step Four: Update and Monitor

Even the best laid plans and smartest forecasts are likely to change with circumstances. For this reason, review and update the cashflow forecast regularly. Cashflow forecasts are most effective when they are frequently updated to reflect actual cash movement and any necessary changes in assumptions. (It’s a good idea to craft a 13-week rolling cashflow forecast and update it weekly to ensure sufficient funds on hand.) Also make a schedule for monitoring and updating KPIs and OKRs. This is crucial in supporting good business decisions as data comes in throughout the year. Now is an ideal time to consider the quality of a business’s data measuring tools – if e-commerce leaders cannot accurately measure KPIs and OKRs, they risk making uninformed decisions, losing out on growth opportunities, and misaligning resources with critical objectives. High-quality data insights ensure precise forecasting and effective resource allocation.

Despite challenges facing e-commerce, business leaders do not have to move through these steps alone. Business advisors with deep experience across industries and market trends are available to navigate each question and uncertainty that arises.

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Aprio’s Managed Services offer comprehensive solutions tailored to meet the unique needs of various industries, including SaaS, e-commerce, and government contracting. With over 50 technology partnerships, our experienced team provides not only skilled accounting and payroll support but also real-time financial insights that empower clients to make smarter business decisions. By leveraging advanced technology and industry knowledge, Aprio ensures compliance and streamlines financial processes, allowing business to focus on growth and operational efficiency. Schedule a consultation today and achieve what’s next at Aprio.com. 

Aprio is the brand name under which Aprio, LLP, and Aprio Advisory Group, LLC, deliver professional services. Since 1952, clients throughout the U.S. and across more than 50 countries have trusted Aprio for guidance on how to achieve what’s next. As a premier business advisory and accounting firm, Aprio Advisory Group, LLC, delivers advisory, tax, managed and private client services to build value, drive growth, manage risk and protect wealth, and Aprio, LLP, provides audit and attest services. With proven experience and genuine care, Aprio serves individuals, entrepreneurs, and businesses, from promising startups to market leaders alike. Aprio has grown to 2,000+ team members providing solutions to clients in industries including manufacturing and distribution, non-profit and education, professional services, real estate, construction, restaurant, franchise and hospitality, government contracting and technology and blockchain. 

Emily Cheshire advises clients on getting started with digital assets, technical accounting issues, and technology solutions, working with forward-thinking CEOs and CFOs of technology companies and startups that want to capitalize on the business opportunities of digital assets, outsourced accounting, financial planning and analysis, and advisory and blockchain consulting.