With the advent of Internet, the number of customers using this medium for online transactions is expected to grow the e-commerce sector. However, there is a huge pressure for the management to raise and manage funds and keep a close eye on cash flows.

Cash flows may affect the success or failure of an e-commerce venture. In simple terms, cash flows indicate the difference between cash receipts and payments. Several factors, such as warehousing, logistics, technology, working capital, and brand building add pressure to cash flows.

Here are two areas that require large investments by e-commerce ventures.

1) Supply chain management
It is important for an online vendor to build a positive brand image for succeeding. An important factor that contributes to this is timely delivery of products to the customers. In addition to creating a positive brand image, punctuality improves cash inflows and working capital for the vendors. This requires the company to invest significant amounts in strong supply chain management and logistics systems.

2) Technology
Using efficient and effective technology is crucial for an e-commerce website. It is necessary for e-commerce ventures to constantly track delivery status and manage the end-to-end cycle. Furthermore investing in technology is important to provide the users with a superior buying experience in order to increase repeat customer base and earn higher revenues.

Strategies to improve operational efficiencies
1) Companies may develop new partnerships and expand related product lines to increase revenues and margins

2) Using an efficient Customer Relationship Management (CRM) system to analyse beneficial business intelligence is advisable. Furthermore, it helps businesses in adopting effective and customised marketing strategies to increase customers

3) Adopting effective cash management services and offering easier payment options to the customers is also important. This would be beneficial in reducing frauds and address issues faced for cash on delivery payment options. An excellent way to achieve this is using electronic fund transfer mechanism.

Here are some common payment methods used to make online transactions.

1) Credit card
It is a common payment method involving various parties. These include the cardholders, online vendors, card issuing company, and the merchant’s bank. A credit card is also known as plastic money and uses a unique number attached to every account. It is a convenient mode of payment for customers while the vendors receive immediate payment thereby helping cash management.

2) Debit card
It is a plastic card that is linked to the user’s bank account. The difference between credit and debit card is that for the latter, the user must have sufficient funds in his bank account before using it. The amount is immediately deducted from the buyer’s bank account and credited to the vendor.

3) Online transfer
Several users transfer money online through the Internet-based services offered by their banks. It is a quick and convenient way to make payments using this mode. Contrary to the popular belief, all such transactions are executed through secure payment gateways.

4) Electronic fund transfers
This is a commonly used mechanism for transferring funds from one bank to another. It is a safe and quick method to transfer money online.

New business models are evolving in the e-commerce industry. The shift from the traditional brick and mortar business to mobile platforms requires technological adaptation. E-commerce ventures are constantly identifying new methods to improve cash management services to reduce their constraints and enrich their customers’ experience.