Question: How can you have a profitable Amazon business but no money left in the bank?
Answer: Poor cash flow management.
This is one of the most under-discussed subjects in the Amazon FBA business model world, this might be more important than profit margin.
You can have a profitable Amazon business, making nice money on paper, but still don’t have any real money to live off because of cash flow mismanagement. As Yechiel Steinberg from SmartPoint Financial a financial advisory and accounting firm puts it, “A business dealing with inventory, must ensure they have adequate profit margins as well as positive cash flow. Both are equally important for survival. But knowing what is the source of your empty bank account is key to understanding how to fix the issue. Lack of profit is solved differently than lack of cash flow. Clear books are the only way to figure out the real source of the issue.”
It could also eat into your profits margins eventually because of accumulated inventory as, Abe Orgel owner of Simple Forwarding a freight forwarding company puts it, “I sometimes see people trying to ship more at a time to save on shipping cost but then will drain their bank paying for this inventory, storage, and then having to sell at lower margins or unable to launch the right campaigns to boost their business long term success.. sometimes it pays to ship less, pay more per item but have a healthier and eventually more successful business.”
So get yourself a good bookkeeper or accountant to to track your cashflow and help you decide inventory order levels.