E-commerce moves fast, and in some cases very fast. This guide takes you through the challenges that online retailers face and how to better manage cash flow with payables and receivables.
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E-commerce moves fast, and in some cases very fast. Product launches coupled with customer expectations and changes in the underlying technology can absorb the attention span of any business owner or accounts manager. All the while, one challenge continues to hang over most e-commerce businesses: paying your suppliers on time while making sure your customers pay you on time as well. Otherwise known as supplier payments vs. customer receivables.
This guide takes you through the challenges that online retailers face and how to better manage cash flow with payables and receivables.
Accounts payable is what you owe to other people, otherwise known as your "outgoings", for goods and services you’ve already received. In online retail, these usually cover:
Timing is the overarching factor. Suppliers issue invoices with agreed terms, Net 30, Net 60, or, in some cases, payment upfront. For those who aren't familiar with the terms, Net 30 and Net 60 just refer to 30 days and 60 days. Managing these payment obligations well is important; it helps cultivate your reputation as a reliable person or company to do business with. That trust can unlock better prices, priority in stock allocations, and even better payment terms.
Pro tip: Many retailers don’t calculate the real “APR” of early-payment discounts. A 2% discount for paying 20 days early works out to more than 36% annualised savings, a better return than most investments. If you have access to short-term financing, it may be worth paying early.
Customer receivables are the money owed to you. In pure consumer e-commerce, most payments are instant, and customers pay by card or digital wallet before you ship. But in B2B e-commerce and wholesale, invoices are common. Shops, restaurants, or other retailers may order stock on terms like Net 30 or Net 60.
That means receivables management is critical. Without a system, unpaid invoices pile up, days sales outstanding (DSO) stretches out, and your cash inflows dry up.
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Payables and receivables don’t operate separately from one another; they’re two gears in the same machine. If customer payments arrive before supplier bills are due, you gain a cash buffer to reinvest. But if suppliers expect payment first, you face a funding gap, even with strong sales.
For online retailers with fast stock cycles and tight margins, even small delays in receivables can mean missed supplier discounts or reliance on costly overdrafts. The timeline below shows how the timing of inflows versus outflows determines whether your cash cycle is healthy, balanced, or strained.
When you put supplier payments and customer receivables side by side, the timing difference becomes crystal clear. Even two retailers with the same sales volume can have very different cash flow outcomes depending on how quickly their customers pay.
Even the most experienced online retailers will face challenges when managing cash flow. The following are some of the most common challenges.
Late payments are a chronic issue for UK businesses, and the data backs it up. Government data shows that more than 40% of SMEs are paid late at least once a month. In retail, where margins are already paper-thin, just one or two unpaid invoices can create a domino effect that ripples throughout the business. A delayed £5,000 payment might mean holding back a supplier bill, which in turn risks late fees, lost discounts, or even delayed stock replenishment. Over time, repeated late payments extend your days' sales outstanding (DSO) and make it harder to forecast cash flow reliably.
Every supplier will set differnet terms, some more generous than others. For example, as most of what the world consumes today, product-wise, is coming out of places like Vietnam and China, retailers and businesses often face up-front payment or Net 15 terms from suppliers. That means retailers may have to part with cash weeks before they start selling the inventory. The shorter the supplier terms, the greater the reliance on receivables arriving on time, or on external financing to fill the gap. For newer retailers without a track record, negotiating longer terms can be especially difficult.
People buy things at certain times of the year more than others, and from a cash-flow perspective, this can be a pain. The Q4 holiday season often accounts for a disproportionate share of sales, but to capture that demand, retailers must purchase and stock up months in advance. This creates a long cash outlay window, where funds are tied up in inventory well before revenues roll in. If sales volumes don’t meet forecasts, or if customers take longer to pay than expected, the business can be left carrying both stock and debt into the new year.
Many smaller retailers still manage accounts payable and receivable through spreadsheets or manual systems. This leaves room for human error, missed reminders, misapplied payments, or delays in issuing invoices. Each mistake adds friction: a forgotten reminder can stretch days' sales outstanding (DSO) by weeks, while a lost invoice can damage a supplier relationship. Beyond the cash impact, these bottlenecks eat into management time that could be better spent on growth.
Global sourcing is common in online retail, but paying suppliers in one currency while collecting customer revenue in another introduces additional risk. For example, if you’re paying in U.S. dollars but selling in British pounds, exchange rate swings can widen any timing gap between payables and receivables. A sudden drop in sterling could make your supplier payments more expensive overnight, tightening liquidity just when you need it most. Unless hedging strategies or multi-currency accounts are in place, these fluctuations can destabilise an otherwise great cash cycle.
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So how do successful retailers manage the push-pull between suppliers and customers? They don’t rely on luck. They combine process discipline, tight controls, standardised terms, and consistent monitoring, with financial tools that smooth inevitable timing gaps.
Tools like Xero or QuickBooks connect payables and receivables in one place. Automated reminders can cut late payments by as much as 30 percent, while dashboards flag upcoming gaps in real time. This keeps cash flow more predictable without adding manual work.
Lining up receivable terms with supplier terms creates stability. A business that collects on Net 30 and also pays suppliers on Net 30 reduces the timing risk that can squeeze cash. Consistency makes it easier to plan and lessens reliance on short-term financing.
Clear credit policies and upfront checks keep weak accounts out of the book. Active tracking of days' sales outstanding (DSO) highlights trouble before it turns into default. Staying disciplined here helps protect margins and working capital.
A simple 12-week rolling forecast helps spot problems before they land. Planning for seasonal peaks or shortfalls means funding can be lined up in advance. It also makes it easier to run “what if” scenarios and build resilience into the cycle.
