The future of small business financing: Navigating cash flow with AI

The Future of Small Business Financing: Navigating Cash Flow with AI by Brightflow AI

Many eCommerce businesses need to raise capital to finance growth, and investors want to see comprehensive financial plans using reasonable assumptions. Effective cash flow management may be the most important component of your financial plan. 

Brightflow AI provides an AI-powered cash management platform for small businesses that enables access to growth capital. Assume, for example, that HighRidge Retail is an eCommerce platform that sells hiking and other outdoor products.

Starting with revenue tracking 

eCommerce businesses may face heavy pricing pressure from competitors, and profit margins can vary widely between products. Selling dozens of products with different sales levels and profit margins makes projecting revenue difficult.

HighRidge reduced prices three times in the last two months on a line of hiking boots, due to competitive pressures. The company also sells four models of tents, and sales have fluctuated greatly over the last year.

Brightflow AI has a revenue tracker to gather and analyze sales data. Users get reports on revenue, units sold, orders, and average order value (AOV) in the Brightflow AI dashboard. Monthly and daily views are available for the revenue tracking feature.

HighRidge can analyze data on each product and determine the financial impact of a price change. The firm can also assess how marketing promotions affect the sales of a particular product. AI tools allow you to create customized messaging to maximize your marketing results.

Forbes reports that 20.1% of retail purchases will take place online in 2024, and eCommerce sales will grow 8.8% in 2024. Without with right software, eCommerce businesses may struggle to manage sales growth. With accurate data, HighRidge can project future sales with more confidence.

Improved inventory management

eCommerce businesses must purchase inventory and incur carrying costs until inventory is sold. Companies must carry enough inventory to meet demand and monitor cash outflows for inventory purchases. 

Business owners negotiate inventory prices on dozens of products with multiple suppliers. Owners need useful data to determine what price they’re willing to pay, and which suppliers can meet delivery deadlines.

Seasonality is an issue for many businesses, and large changes in customer demand affect inventory purchases and cash flow. Nearly 50% of HighRidge’s sales occur between March 1st and April 30th, as buyers prepare for summer outdoor activities. 

AI can help you make revenue forecasts that account for seasonality. AI data can be updated in real time, so you always have accurate information to make decisions.

Projecting cash flows

eCommerce businesses must accurately project cash inflows and outflows, based on revenue and expense data and other factors. Here are the steps HighRidge uses to project cash flows using AI:

Detailed revenue forecast

HighRidge projects sales for each product and runs scenarios that assess changes in total sales based on price changes and marketing efforts. The company spends marketing dollars to promote items, and discounts slow-selling products to move inventory off the shelves.

AI helps eCommerce firms identify growth opportunities. If a profitable product line is selling well, HighRidge may add product offerings and shift marketing dollars to promote the items.

Forecasting expenses

The detailed sales forecast is used to project inventory purchases. When revenue scenarios are produced, the software takes inventory costs into account. The forecast accounts for supplier payments, and how many days the firm has to pay each invoice. 

HighRidge also plans spending for IT, marketing, advertising, and other overhead costs. 

Cash management

The revenue and expense forecasting is used to project cash inflow and outflows. To manage peak customer demand between March 1st and April 30th, for example, HighRidge makes large inventory purchases in January and February. 

The AI software generates a monthly cash flow forecast. If the cash balance is negative in any month, the business borrows money for a line of credit (LOC). The LOC is repaid as soon as excess cash is available. HighRidge also accounts for interest expense on the LOC.

Leverage AI to improve results

The eCommerce industry is growing quickly, and your business must manage pricing pressures, sales fluctuations, and changes in customer tastes. To properly manage cash flow, eCommerce firms evaluate dozens of variables.

AI functionality eliminates manual work so that businesses operate far more efficiently. AI tools can also be integrated with Amazon and other eCommerce platforms to increase productivity. Businesses can benchmark results to assess company performance.

eCommerce companies that don’t leverage AI spend far more time on cash flow forecasting and increase the risk of error. These firms can’t quickly change a cash flow forecast when prices or customer demand changes. Use AI to gain an edge on the competition.

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