9 Tips for Ecommerce Businesses to Manage Finances During COVID-19

A 21 day nationwide lockdown in India in order to cope with the CoronaVirus is impacting lakhs of small businesses, including online commerce. A temporary shutdown of manufacturing facilities, disruptions in logistics, overstocked supplier inventories, conservative consumer spending, fixed overhead costs and overdue vendor payments is causing a huge strain on the financials and cash-flows of many an e-commerce in India. The focus of most Indian online commerce companies is now to better their financials overall, be it cash on hand and outgoings, short-term capital, identifying financial risks and mitigating damages

To help you manage your cash-flows and finances better, we have prepared a list of top 9 recommendations which can help you navigate through these uncertain times and be better prepared to take advantage of the recovery. 

Keep your financials up-to-date and list down possible business impacts 

In order to understand the current financial state of your business and identify the best possible actions to keep your business afloat, it is very important that you update your financial statements. Analyse the statements using financial ratios - Profitability, Liquidity, leverage and efficiency ratios.

To understand total financial impact, prepare a sheet in the following format (this is only an example) :

Possible business impact because of COVID-19	Financial impact estimates	Possible mitigating actions/tasks
1. 40% Drop in traffic to your store/website	- -	- -
2.  Key Supplier is unable to service your orders for a period of 3 months	- -	- -

Once you have prepared the above sheet, you need to revisit your budget. Consider how each of these shortfalls impacts your cash-flows. Regarding capital investments, you will need to prioritise different projects and hold on to some which won’t offer you competitive advantage in the short-term.

Seek alternate financing options to fill short-term cash shortages

We've compiled a list of lending partners have who offer short-term loans or credit  to digital-first small and medium scale businesses for easy access to capital:

• Klub: Klub is a financing marketplace enabling consumer brands to raise capital from their super-fans and pay it back as a share of their monthly revenue. Through Klub, brands get access to skin-in-the-game capital which is non-dilutive. Super-fans of the brand, in turn, are able to support their favorite brands and get above-market returns. Capital raised through Klub is applicable for high RoI repeat use cases, including digital marketing and inventory. Given the ongoing Coronavirus crisis, Klub creates a new option for brands to raise capital linked to their future revenue growth from their biggest supporters - their loyal customers. To provide additional support to brands in these challenging times, Klub is providing a one-month repayment moratorium. If you are interested in knowing more, please reach out to through their website or at brands@klubworks.com  

• GetVantage: India’s first Revenue-Based Financing Platform that provides growth capital to digital businesses. GetVantage finances your Digital Marketing & Working Capital and recovers it as percentage shares of your revenues. No equity, 0% interest, no hidden charges. Just One Flat Fee. They take pride in being a native of the digital economy and have long believed that digital businesses need better alternatives to raising capital. The process is frictionless and completely digital; from application to disbursements to collections. You can instantly access an indicative termsheet and have your deal terms within 2 weeks of completing the application. 

• Indifi: With no collateral, minimum documentation, and availability of several top lenders, Indifi online e-commerce loans makes the whole process of acquiring a loan simple and quick. The loan is customized as per the needs of online sellers to suit the dynamic needs of online commerce businesses

• LendingKart: Lendingkart Finance Limited (formerly Aadri Infin Limited), is a non-deposit taking NBFC, providing SME lending in India. It has special MSME loans and SME loans for businesses looking for quick finance in India. These loans are approved through an online process which helps in speeding up the financial vehicle delivery. Lendingkart also allows several customisations to its financial products which makes them ideal for today’s competitive business environments

• Cash Bean: P C Financial Services Private Limited (the' Business') is a Non-Banking Finance Company which is engaged in loan and advance business. One of their products, CashBean App is an Instant Personal Loan platform that provides short-term personal loans via a simple customer journey. More than 30 Million users are currently active in India

• Drip Capital: Drip offers a unique trade financing solution to solve the working capital problems among small and medium-sized exporters in emerging markets like India. The financing is collateral free and offered through a completely digital process

You can also explore buying corporate credit cards from emerging service provider companies for availing short-term credit. Their rewards program gives you access to multiple other perks and discounts as well. Below are the two companies which offer such cards:

• Enkash: EnKash provides Business Credit Cards for SMEs and Startups. Business credit cards are a great way to solve for the short term credit and convenience as their needs are unplanned and ad hoc. Business credit cards provide the benefit of interest free credit for 30 days and thereafter interest is charged only on the amount carried forward unlike other term loan products. These business cards can be used anywhere in the country for all day to day business expenses. Click here to know more about Enkash. Special offer for Shopify merchants: Upto $20000 worth of discounts from their rewards program and upto 60 days of interest free credit (conditions apply).

• Karbonkard: Karbon Card offers corporate cards tailored for D2C ecommerce businesses with an ARR of 4 Cr/ 35 lacs MRR and minimum 1-year-old in vintage. It provides rewards worth $50,000 & more on vendors such as Hubspot, Segment, Amazon, Flipkart, Make My trip, Cleartax, Uber, etc tailored for startups helping you spend smarter

Inject additional capital from your investors and banking partners

Share a detailed growth strategy and plan of action with your investors and/or banks to show how you are on top of your business.

If you haven’t availed any business loans in the past, we have compiled a list of special loan packages created by traditional bank for small and medium scale enterprise businesses:

• Bank of Baroda : Bank of Baroda’s SME loan pack provides a single line of credit for meeting SME borrowers’ working capital requirements. All MSME enterprises as defined under MSMED Act 2006 are eligible to apply. You can find more information here. To meet temporary shortfall in liquidity, they offer short-term loans as well to small and medium scale businesses

• Yes Bank: Yes bank’s cash-backed lending program provides non-fund based letter of credit, buyers credit and bank guarantee. It can be used for procurement of raw materials or capital goods. Yes Bank’s Smart Overdraft offering provides working capital loans limit up to INR 1 Cr without a balance sheet. To know more, click here

• HDFC Bank: HDFC Bank offers business growth loans of upto 40 lakhs INR to fulfil your different business needs. They do provide working capital loans as well starting from 10 lakhs INR, but it does need collateral

Closely monitor relief measures announced by govt, state govt, RBI, your bank and payment service providers

Special emergency loan packages and schemes have been announced by more than dozen state owned banks like Bank of India, Bank of Baroda, State Bank of India and many more. Private banks are yet to share their relief measures. 

As per government relief measurers announcement for the organised sector, the government will pay entire provident fund contributions for the employees with wages less than 15k INR per month in companies having less than 100 workers. 

RBI has also announced relief measures to ease liquidity. It has announced a moratorium of 3 months on payment of instalments on all term loans and working capital loans including credit card dues across all types of lenders. For opting for the moratorium, borrowers will have to approach their lenders to show how their income has been impacted. Please note that interest will be accrued during the moratorium period. 

PayPal has announced set of relief measures and is waiving off the chargeback fees for disputes raised by credit card customers (between Mar 26, 2020 and Apr 30, 2020), doubling the time to respond to buyer disputes from 10 to 20 days and extending the seller protection to include intangibles (starting April 13, 2020). 

Identify alternate revenue streams

Pivot your business: Some brands have started manufacturing essential items in their facility during the lockdown so that essential items sales offset the slowdown in their business and also support the community in these tough times. 

Another example is of one of the restaurants who started selling fresh produce online during the lockdown.

• You might also want to consider expanding your business in other relevant countries where you see low or medium level of disruptions. 
• Explore if there are any paid ancillary services that can be offered which can help you bring additional revenue. Examples include: If you are a fashion apparel company, can you provide 30 mins fashion consultation sessions by tying up with some fashion influencers? If you are selling products in the fitness category, can you provide diet planning service to your customers by tying up with nutritionists? 
• Once the situation improves, try to identify the consumer spending trends for the next few months and see if it’s possible to expand your business in those high-demand product categories

Think about all the possible alternate revenue streams, understand the potential each holds, and see if you can pivot in one or two different directions in the short-term

Cut down costs/non-essential spends

• Evaluate better deal and rates with your payments and shipping partners to help you reduce transaction fees and shipping charges. Check with your payment partner if they can offer same-day settlement for some free flow of capital
• Be really sharp on where your marketing spends are going. You should prioritize any non-essential marketing spends in the short-term. You can get free marketing audit of your campaigns from Shopify digital marketing expert, Adyogi to get better ROI on your paid campaigns in these difficult times
• Identify web and digital agencies who are supporting businesses in the time of COVID-19 by charging nominal fees for store-setup and development customisations. Find such Shopify experts here
• For customer discounts, you can check with your payment partner if they can share a part of the burden of discounts while you push their payment option on your website
• Automate various manual operations and tasks
• Reduce packaging costs, even if it comes at the cost of aesthetics.
• Audit administrative expenses and identify unnecessary costs 
• See if there are any alternate source of supply, given the quantum you may be buying now has changed : evaluate any efficiencies there as well. 

Seek payment extensions from your suppliers

In case you had set any standing instructions to auto-debit supplier payments, initiate a conversation with your suppliers. Explain them in detail about the current state of your business and seek payment extension. If the supplier is also struggling with cash flow, establish an agreement which both of you can agree with. Here are some of the tips which you can follow while negotiating the payment terms

Consider setting up alternative suppliers if needed and start payment negotiations early. You can use some of the local B2B portals like IndiaMart, Udaan, cross-border B2B portals like Alibaba, Spocket and more to source suppliers for your business. For dropshipping, here is the list of Shopify apps from which you can find products to sell

Manage your inventory

For a number of online businesses, 70-80% of your sales usually comes from 10% of your products. Run ABC stock analysis and demand forecasting using a software like Stocky to identify the most selling items. To categorize inventory/products into ABC groups, in terms of consumption, 80 percent of the value of inventory would be held in about 20 percent of the items. Categories B and C would make up the remaining 80 per cent of the items, perhaps B with 30 per cent and C with 50 percent.

Once the situation improves, you would want to promote the items whose expiry dates are due in the coming months, slow-moving items or excess stock items. If you think there is going to be a shortage of your A categorised stock from your supplier try negotiating with the supplier to exchange B/C categorised stocks with A categorised stocks if possible. If you are unable to sell low selling stock, try to liquidate it.

Squeeze every drop sales in that funnel

While hacks to increase sales is something you do every single day, it is even more critical now to up the ante on it. Given that customers are likely to stay home and avoid visiting physical stores for the next few months, you might want to consider charting out the reboot strategy you can act upon once the movement of e-commerce goods is allowed by the government. Here is the list of short-term revenue strategies.

• Partner with other brands who are providing complementary products and promote each other’s products 
• Start running wholesale business on your website if you have excess inventory
• List your product offers on platforms like Cred, Paytm, Phonepe Switch, LBB, StepSetGo to increase traffic on your website leading to more sales

Since its emergence, The COVID-19 has impacted business across the world, irrespective of their sizes. Given that the going is going to get harder, it is important to focus on what has distinguished good businesses for generations: ingenuity, flexibility and the ability to adapt to change. 

If you are looking to start an online essentials business with a pick-up set up, as opposed to a delivery, you could read about it here.

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