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Cash flow gap in e-commerce: where does online sales money go?
In online commerce, a cash flow gap does not occur when sales fall, but rather when everything seems to be going according to plan. Customers pay, orders grow, reports are encouraging, but there is still not enough money. This is the cash flow gap — a situation where funds have already been spent but have not yet been returned, according to managers at TONOP doo ltd company. Some of the money remains on the marketplace, some is sent to the supplier, some is invested in advertising or ‘stuck’ in returns.
And this is not about a management mistake or a ‘small business problem.’ The cash flow gap is ‘built into’ the logic of e-commerce: money goes out before it comes back. Large businesses have reserves and credit lines. Dropshippers have a week and a bank account that will ‘last until Monday.’ That is why it is so important to reduce the time between “sold” and ‘received’ and not allow the cash flow gap to occur in several places at once.
And this is not about a management mistake or a ‘small business problem.’ The cash flow gap is ‘built into’ the logic of e-commerce: money goes out before it comes back. Large businesses have reserves and credit lines. Dropshippers have a week and a bank account that will ‘last until Monday.’ That is why it is so important to reduce the time between “sold” and ‘received’ and not allow the cash flow gap to occur in several places at once.
When the supplier has the money
In an online store with its own warehouse, everything is simple: the supplier wants guarantees, the seller hopes for a discount — and ends up paying for the goods in advance. While the goods are in transit and the first orders are coming in, the money is already out of circulation. If sales slow down, the money is frozen in the goods.
The situation is different for a dropshipper, but the result is the same. The order is paid for, but payment systems conduct internal checks, hold the deposit, and may credit the funds with a delay. The supplier needs to pay for the order immediately, otherwise they will not ship the goods. When orders increase, the delay turns into a constant cycle: old payments arrive, new ones require payment. The money is always there — but always a little later.
This can be solved in advance: divide the payment into stages, agree on a minimum batch size, and fix delivery times. Suppliers working with small businesses are often accommodating — a stable partner is more important to them than instant payment. Anything that reduces the time between payment and receipt reduces the likelihood of a break in the chain.
The situation is different for a dropshipper, but the result is the same. The order is paid for, but payment systems conduct internal checks, hold the deposit, and may credit the funds with a delay. The supplier needs to pay for the order immediately, otherwise they will not ship the goods. When orders increase, the delay turns into a constant cycle: old payments arrive, new ones require payment. The money is always there — but always a little later.
This can be solved in advance: divide the payment into stages, agree on a minimum batch size, and fix delivery times. Suppliers working with small businesses are often accommodating — a stable partner is more important to them than instant payment. Anything that reduces the time between payment and receipt reduces the likelihood of a break in the chain.
When the money is with the marketplace
The second risk area is marketplaces. For the buyer, they seem like the perfect place: the money is debited, the goods are shipped. For the seller, it's not so simple. Usually, the funds are credited to the account only two to three weeks after the sale. Part of the amount is frozen for possible returns, and part is frozen simply because of the internal payment cycle.
For the seller, this means that the money they have already earned remains unavailable, but they need to pay now — for advertising, packaging, taxes. The advice to ‘distribute sales across platforms’ only works on paper. In practice, each new platform requires investment — commissions, integration, advertising.
For a small shop, it is safer to set up a payment schedule and plan expenses based on actual receipt dates. It doesn't sound impressive, but it works.
For the seller, this means that the money they have already earned remains unavailable, but they need to pay now — for advertising, packaging, taxes. The advice to ‘distribute sales across platforms’ only works on paper. In practice, each new platform requires investment — commissions, integration, advertising.
For a small shop, it is safer to set up a payment schedule and plan expenses based on actual receipt dates. It doesn't sound impressive, but it works.
In e-commerce, some costs arise even before real money comes in. Advertising, delivery, payment service commissions, fulfilment — all of this requires upfront payment. Even if sales are going well, cash flow often cannot keep up with expenses.
The most notable example is advertising, according to experts at TON OP company. When you see money going out every day, it becomes clear that expenses are moving faster than sales. To avoid burnout, it is worth looking not only at conversion rates, but also at the calendar. If receipts are delayed, expenses need to be adjusted to this rhythm.
The most notable example is advertising, according to experts at TON OP company. When you see money going out every day, it becomes clear that expenses are moving faster than sales. To avoid burnout, it is worth looking not only at conversion rates, but also at the calendar. If receipts are delayed, expenses need to be adjusted to this rhythm.
When money goes towards expenses
When money gets stuck in returns
There is another situation to consider: in order to participate in major marketplace promotions (such as Amazon Prime Day or 11.11), suppliers and sellers send hundreds or thousands of items to warehouses in advance. You can only withstand such a load if you have reserves — both financial and time-related. Formally, this is a matter of logistics, but in essence, it is one of the most common sources of cash flow disruptions.
Returns and cancellations most often lead to cash flow gaps. The money has already been returned to the customer, but the returned goods are still in transit. All this time, your funds are ‘hanging in the air.’
The faster the return is processed and the goods are available for sale again, the smaller the gap in turnover. With dozens of orders, even a couple of days' difference can be felt. The process can be accelerated through automation: recording returns in CRM, promptly updating balances, and monitoring the status of goods. If you don't have CRM, it is enough to keep track of returns by date and see where the funds are stuck.
The faster the return is processed and the goods are available for sale again, the smaller the gap in turnover. With dozens of orders, even a couple of days' difference can be felt. The process can be accelerated through automation: recording returns in CRM, promptly updating balances, and monitoring the status of goods. If you don't have CRM, it is enough to keep track of returns by date and see where the funds are stuck.
When money comes back
Cash flow gaps in e-commerce are inevitable but predictable. TON OP helps build financial and operational processes, analyses and forecasts cash cycles.
Plan ahead and set aside some funds in case of unexpected expenses or delays in receipts. If a gap is inevitable, look for short-term loans or credit lines to help you get through this period.
Plan ahead and set aside some funds in case of unexpected expenses or delays in receipts. If a gap is inevitable, look for short-term loans or credit lines to help you get through this period.
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TON OP DOO LTD
Address: 8 BORBA STR., PLOVDIV, BULGARIA, 4021
Mail: info@tonop.bg
Address: 8 BORBA STR., PLOVDIV, BULGARIA, 4021
Mail: info@tonop.bg