As an ecommerce veteran – and someone that talks to retailers from all parts of the world – Yep. “Heard it”. “Seen it”. “Done it”.
I want to share “a perspective” as traditional retailers dive deeper into the “big scary exciting” world of ecommerce.
WATCH THAT CART CASH!
Ok – “Cart Cash”. The ecommerce cart “rings” – payment collected. Batch deposit – reconciliation done – it hits the bank. I’m referring to all receipts in. Calling it “cash”. There that cash sits. Now what?!
Before we go any further. This is all my opinion (disclaimer). You should always seek professional guidance on all things legal and accounting/financial from a licensed professional. Never act on “opinions”.
The fine print out of the way.
All that “cash” pouring in from the magic cart. Fact. Each dollar coming in is a liability. You are “holding” it in exchange for a good. Seems rather “duh”; it’s not yours until the customer gets their item(s). Period. But – we know the trouble starts to interject itself quite naturally (and quickly). “I’ll pay for the item“. “I’ll use just a little here“. “It’s just a small bill I’ll pay with it.” “They never cancel.“. Theoretically, all that “cash” should sit in a dark drawer until the customer has the product in their hands that they gave you the money for. Accrual. Done. 100% safe.
Cash-in – Goods out. This works almost perfectly if you have the item in the warehouse (a) and (b) they leave item in hand or you can get it on a truck in the next few days. Hello Amazon. Yes, there is still a chance they refuse it, or it is damaged, but the risk profile in this – low. Could you treat the cash-in on these sales a bit more “aggressively”? I’m not answering – just painting the landscape.
Risk – in your favor (more so).
Cash-in – Now let’s order it. How about those items that you have to “order” from the vendor for the customer? Those well-crafted fancy cancellations and returns and refunds terms and conditions aside (all of which mean nothing initially to a credit card company – they will review it all if it ever comes up – AFTER they hold the funds) – the timeline on items you DON’T have in the warehouse is now much (much much) longer. Cash-in. Remember the dark drawer. The longer the span between “submit order” and the time the customer sits on their new chair – the greater the risk profile becomes. Days and weeks and months become HUGE variables in canceled orders. Risk – Risky(ier). Accrue it. Dark Drawer. Do you “accrue” all the cash for “to order” orders?
Let’s add even more “complexity”. Not going to proclaim all are the same – but do you know most credit card companies only approve you to “authorize” the amount on anything that isn’t ready to ship? That is what we call an “ah-ha” moment. I could be wrong. You might have your own bank. I apologize then. But if not – Go check. You need to know this. What is your merchant processors policy on when you can actually hit the card for the actual cash?
Cash-in – Now let’s order the sofa in the Grade A Pink with the 90-day lead-time. Amping it up even a bit more. How about if (when) you “take a deposit” on that special-order sofa? That chair with a 6-week turnaround or that sofa with a 90-day lead-time. Guess what. “Well we have a no-cancellation policy on special order“. Yep. Vendor doesn’t ship. Whatever. Hate to state the obvious – it’s a “deposit”. Pretty clear. Dark drawer here it comes. (Not the enemy – just asking and observing). How do you handle deposits?
A bit more seasoning to the conversation. What if all your online orders cancelled? Boom. Cancel my order now please. Can you give all the people their money back? What if M/C and Visa hold it in a dispute. Crap! Open the dark drawer.
We know retailers “play the float” – dang most have “perfected it”. Scary. Kind of like saying “It’s a sure thing” or “I have a system”. Online “cash” is an entirely different thing and conventional (historical) practices probably don’t translate the same.
Stop. Evaluate. Ask. Implement.
Ok. No real solutions or guidance – except to STRONGLY ENCOURAGE you to make sure you know what you are doing in the “omnichannel” and how you handle all the cash. It WILL impact your business. I have seen too many retailers treat “cart cash” like a college student with $50 on their ATM “available balance”. Let’s hit the town! You have to have a solid grasp on this so you can weather and absorb a less than perfect outcome. “Cart Cash”. Know it. Somewhere in there is the formula that is right for you.
- Look at your “cash-in-hand” practice for all your channels (offline/online). Know this!
- Map it out.
- Ask your professionals. Determine what is right.
- Document your “cash” process.
- Communicate it to your entire team.
Cash is king indeed – but how quickly the boat can flip when the storm hits.