Expert Insights: How DTC Brands Are Optimizing Cash Flow and Inventory for EOY

As we're in the midst of Black Friday Cyber Monday (BFCM) week, many DTC businesses are executing their Q4 strategies. For these consumer brands, especially those partnering with ecommerce accounting services, the focus is on optimizing both cash flow and ecommerce inventory management. But what separates the successful ones from those struggling? We reached out to some of the most insightful leading DTC financial experts in our network to share strategies that have improved ecommerce profit margins and DTC cash flow for their clients this year.

We call it the Finaloop DTC Finance Insider's Club, and you can expect more where that came from! Whether you handle your own bookkeeping for ecommerce business or work with financial partners, these insights will help guide your end-of-year strategy.

With no further ado, here's what they revealed about improving financial performance during the crucial holiday season:

Maximizing Existing Relationships for Better Cash Flow

"One of the most effective steps I took with a client to improve cash flow and inventory management was negotiating better terms with their existing vendors. Often, improving the cash cycle doesn't require drastic changes to operations—sometimes, it's about maximizing relationships already in place. In this case, we approached key suppliers to renegotiate payment terms, aligning them more closely with the client's sales cycles and cash inflows.

“The goal was to extend payment periods without negatively impacting supplier relationships. We discussed the client's growth and long-term plans, which helped the vendors to see this renegotiation as mutually beneficial. By securing an additional 30 days on several major payments, the client was able to keep more cash on hand, reducing the need to dip into credit lines or use inventory financing. 

“This adjustment was relatively simple to implement and had immediate benefits. It allowed the client to reduce cash outflow during lower-revenue periods, ultimately smoothing out their cash cycle and improving liquidity."

Alicia Thrasher, CPA | Founder & Lead Accountant, KEPT Finance

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Strategic Pricing and Ad Spend Management

"We're focusing on pricing and ad efficiency. A 50% discount may get sales flying… but that may result in a very low gross margin. Then, you have to have the inventory for it. Pricing goods in a way that makes the company money and not blowing ad spend on heavily discounted items is what we're focusing on. Don't stop ads, but don't spend all your ad dollars on huge discounted items. Consider BFCM directed heavily toward your existing customer base + pick ads back up when the BFCM excitement has died down.

“A 30% Marketing Efficiency Ratio (MER) and 60% Cost of Goods Sold (COGS) leaves little room for profitability."

Courtney Myers, CPA | Founder at Freedom Finance

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The Hidden Impact of Discounting

"Discounts are an often-overlooked piece of the BFCM and holidays puzzle. It is easy to be reactive and increase the discount offered if sales aren't up to forecast or if your competitors are offering more than you.

״However, it's crucial to make sure you are dialed in to the impact that will have on your margins and inventory position. We've seen this be mismanaged and crush some great brands during BFCM and the holiday season."

Jeff Lowenstein | DTC Fractional CFO, Co-Founder of Free to Grow CFO

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Risk Management Through Revenue Distribution

"I have a $40m eComm brand I work with that historically has generated 65% of their annual profit in the month of November. This is a huge concentration risk. We uncovered this in our historical financial statement analyses and forward-looking financial projections.

“With this insight in hand, I challenged the leadership team to consider how they could reduce this concentration risk by earning some of its annual profit earlier in the calendar year. As a result, they tried the brand's first-ever Labor Day Sales, and it was a huge hit.

“They still have a huge goal to hit in Q4, but it's less than it would have been otherwise without the Labor Day Sale. The sale also filled up the bank account with some extra cash going into the holidays."

Jon Blair | DTC Fractional CFO, Founder of Free to Grow CFO

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Leveraging Technology for Better Cost Control

"Using Finaloop's new InventoryIQ tool, our customers are able to accurately configure their landed costs, allowing them to price accordingly, and get much better visibility and planning into their pricing and gross margin.

“We've had customers cross-pricing between various SKUs, and they were, in fact, in a loss position on some of their items. Being on top of your COGS is always crucial, especially in the hectic holiday season."

Jacob Becker | Head of Ecosystem Education, Finaloop

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Need help optimizing your DTC brand's financials? From real-time bookkeeping for ecommerce business to dedicated ecommerce accounting services, book a short consultancy call with one of Finaloop's ecommerce accounting experts.