Overcoming The Toughest eCommerce Cash Flow Challenges and Growing your business
Cash flow is very important because this will be the basis of how much funds move in and out of your business operations. It's the most crucial metric that all e-commerce business newbies and experts should start paying attention to.
Ecommerce trends have grown significantly in recent years and dramatically have increased during this period. At the same time, customers' purchasing behavior evolves over time. The high demand for eCommerce services presents great opportunities for individuals. As it is known that running an online business has never been a piece of cake. Overseeing the whole business operation, actively engaging with your customers to meet their expectations, and even delivering products tailor-fit to your customer's needs all these and more. How are we addressing those business hurdles?
Essentially, business owners need to understand the pillar of their businesses, one of that is understanding and being engrossed with Cash Flow management, and how you adequately create plans relating to your business operation activities. All business' solid ground boils down to operational cash flow. As you know many businesses fail because of inadequate funds. That’s the main factor why eCommerce businesses need to manage cash flow well. Proper monitoring of how much cash enters and leaves the business is a good way of identifying any possible issues that may arise and preventing pertinent issues. Navigating the salient aspects of cash flow could bring a significant strike to your business as this will be the basis of how much cash usage you have over time. We can say the number one metric that all businesses newbies and experts should start paying attention to.
Why Is Operational Cash Flow Important?
As a business owner, you should simply be aware of how much cash your company consumes in your operation activities and how much income you gain from your capital built up. In this way, you can make adjustments that best serve your business operations.
General studies conducted show that businesses fail due to mismanagement of operational funds. In other words, Cash flow is the silent killer of a growing business if not properly planned. It is said prevention is better than cure that is why effective business planning can help save your business from downfall. Keep your business moving by having control of your cash movement in your business activities as a benchmark for informed decisions and eventually greater results.
In a successful business, you will spend a lot of money every day, but you will also make money every day. That is why it is very critical to monitor the movements of your cash flow daily. Have you ever imagined what would happen if the inflow of your cash suddenly stopped and you are still bringing money out every day? This is a big and common problem that many eCommerce businesses face with Shopify Payment and with Paypal. Generally, dropshipping businesses that use services such as Shopify Payments, Stripe, Paypal, and other payment gateway services end up facing hold because of a lack of transparency on these payment providers. What do we mean by this? Well, we also experience a hold not only on Shopify for 25% of our revenue but also on PayPal that runs almost 180 days sometimes which is not acceptable.
Managing your eCommerce business eventually cannot run on these holds because if you’re spending money every single day and they're going to hold 25% of your funds for a later date you might not have enough profits to make up for that difference and could not cope up with the gap, therefore, your business might be put to a halt or freeze and you cannot afford this especially if you're playing within the margins. Most eCommerce businesses have different margin bases; the common margin practice ranges from 30 to 50 percent of their gross profit and some can be broader depending on their overall business operations. Dropshippers play safely on a 30% margin but if your margin swings around 20 % or less you are likely to face some serious threat of payment hold from your payment providers.
At this point, we need to figure out how to solve your biggest eCommerce cash flow challenges and be able to grow your business. So how do we avoid these problems with Shopify payment holds and PayPal payment holds? In this article, we will give you some amazing tips and tricks where we have gotten to a point to manage to stop and prevent any single hold since the first we had a hold.
These are factors to consider why eCommerce businesses experience funds hold and how to prevent them.
- Figure out what causes the payment hold and what factors may trigger the payment suspension.
- Evaluate if you provide enough tracking information to your payment providers.
- Back up your Sales Transaction with documentation in case of customer complaints.
- Attend and communicate your customer's requests in a timely manner.
- Analyze business activities that may result in abrupt sales spikes.
- Make sure to update your Sales Transaction Activity Page.
- Meet your customer's expectations.
Furthermore, It’s a common practice by many dropshippers to purchase and ship products from china. It is ordinary when products are shipped internationally, it takes time to arrive and that's not good when you have a delivery time that might be over 30 days to your customer. In many cases, you may not know the tracking number of your order right away, but some services provide immediate, real-world tracking information at a very low cost and with excellent delivery times.
One of them is CJ dropshipping, it's a popular platform used to source and supply products for dropshippers. It's one of many different platforms out there that allows you to connect with agents so that you can lower your shipping times and source your products efficiently plus auto fulfill your orders daily and get the best rates and quality service. A one-stop service platform covering all the services related to dropshipping businesses.
Take note that the delayed submission of tracking information prompts Shopify and Paypal to hold your payments. Generally, PayPal holds funds in order to monitor if transactions made are not high risk and in case of any claims, disputes, or other concerns, funds are readily available to resolve those issues.
With the help of platforms like CJ Dropshipping immediately within 24 to 48 hours, they give tracking information directly to Shopify whenever your customers place an order on your website. This is a very good practice to maintain Shopify payments' in good rating so you don't get a hold of your account.
Now, let's tackle why PayPal holds funds and how we can possibly prevent it from happening.
- PayPal wants to see consistency, how you provide a good and quality service to your customers
- Paypal doesn’t want to see 50 or more days delivery times and they found out that no tracking information is associated with every order.
- Your Paypal Sales Transaction Page is not updated.
- PayPal identifies any suspicious business sales spike.
- Multiple Chargeback, Refund, and Dispute requests.
- PayPal has a grading system that checks the reliability of your store.
These are the reasons why we recommend using an application on Shopify like Paltrack. Paltrack is a solution that automatically syncs your tracking information per order directly to your PayPal account on autopilot. By using an automated app you don’t have to go through the hassle of every single checkout placed and putting tracking information to your Paypal. If you're using a platform to fulfill your shipment and complete the orders in your store, Paltrack instantly takes the information from your Shopify and submits it to your PayPal account. Paltrack will automatically sync tracking information to your PayPal as soon as possible, so you never have to worry about a hold again from Shopify or Paypal.
Paltrack is a solution developed to sync fulfilled orders tracking information between your Shopify store and your PayPal account on autopilot. With Paltrack you will be able to maintain a good PayPal Account tracking record. This ensures that your PayPal Seller account is in good standing and meets all their requirements.
PayPal tracking info sync app protects you from the following issues:
- Lose money to chargebacks
- Worry about your PayPal account getting shut down or suspended
- Have money being in Paypal Hold for days
- Receive endless PayPal Account review
Thousand of Shopify merchants built their trust with Paltrack. We encouraged newbies and experts to learn more about How Paltrack helps you avoid PayPal Disputes and PayPal Suspension
Furthermore, we also want to warn you about Chargebacks. This is when your customer initiated a complaint and requested a refund from you. Chargeback usually happens if you render a fully crappy service and your delivery time takes longer than expected. Providing your customers with overall low-quality service or if you’re not focused on improving your business service you will surely receive thousands of chargebacks. Many dropshippers are very mindful of their store service operations to avoid chargebacks. Receiving chargeback and customer complaints are also pain points that slow down your business progress. That is why meeting customers' expectations are part of providing quality service.
The key point here is to make sure that your chargebacks are under 1% of your total orders. Let's say you have a thousand orders received, your chargebacks should be no more than 10 chargebacks. If you get 10 chargebacks or more you will have a serious review placed on your Shopify Payments and these are factors that might even suspend your account or at worst completely ban you from using their payment services.
To avoid or minimize receiving complaints and chargeback requests, what matters is you need to properly service your customers efficiently. For newbies, there are things that could go wrong because you have to navigate and adjust your business operational approach and you might not be able to maintain that ratio of 1% percent chargebacks or less. If this happens, you'll be forced to use and shift to a different payment provider that is more susceptible to higher chargeback rates but you need to consider a higher monthly fee but charge a much lower transaction fee where Shopify payments charge 2.9 plus 1% per transaction payment, Stripe payment service charge to 3%. The higher the payment provider permitted a higher percentage of a chargeback the more expensive is their service charge. Make sure that you would not get above one percent chargebacks, be very good with your customer service and make sure of no customer complaints to avoid any chargebacks. You can't afford to lose your payment provider as it's a hassle to get one for some documentation requirements. Added things to consider. Whether you want to lose your payment provider or not you should take care of your chargebacks right away and submit a proper response with as much information as possible so you have a high chance of battling these chargebacks.
If you want to provide quality service you should also work on your store policy. It should be clearly stated in your return policy that if something is wrong or damaged with the products, your customer should expect the resolutions without asking for much proof. Quality service is good marketing, simply meeting your customers' needs. Just in case any customer files for a chargeback, you can battle them efficiently by providing proof of your sale transactions and you need to contact them and resolve the issue immediately to prevent it from becoming a major issue and to protect you from chargebacks.