Quick answer
An online store pays for stock and advertising before it is paid for the sale. Supplier deposits, freight, ad spend and platform fees all go out first, while processor payouts and marketplace settlements arrive days or weeks later. The faster you grow, the bigger that gap gets, so forecast cash by order cycle, not by month.
Key points
- Ads are paid on the day they run, but revenue arrives only after payout delays and after returns are netted off
- Stock is often paid for months ahead, and imported lines add freight time that stretches the cycle further
- GST applies to imported low-value goods sold to Australian consumers, and registration is required once GST turnover reaches $75,000
- Returns, chargebacks and refunds reduce cash after the sale, so a flattering sales figure can overstate what you keep
- A line of credit or stock-backed facility often fits better than a lump-sum loan because needs rise and fall with seasons
An online store gives you a number every morning. Orders yesterday, revenue yesterday, conversion rate. It is easy to take that dashboard as a picture of how the business is going. The bank account tells a different story, because the cash behind those orders is on a delay, and the cash for the next batch of stock is due before it arrives.
Why does cash leave before it arrives?
Take a single product. Before a customer sees it, you have usually done most of this:
- Paid a supplier deposit, often 30% to 50%, when the order was placed.
- Paid the balance before the goods shipped.
- Paid freight and, for imports, customs-related costs.
- Paid for photography, listings and software.
- Paid for ads to bring people to the page.
Only then does the order arrive. The customer pays your processor or marketplace immediately, but you may not see it for days. Returns come back later and are deducted. The final amount landing in your account is a different figure from the revenue you saw on the day.
The result is a cash cycle that, for an importer buying from overseas, can easily run to 90 days or more from first payment to money in the bank. A store that doubles its order volume needs to find roughly double the cash to sit in that cycle, which is why a store can seem to be succeeding while it quietly runs short.
What does the cash conversion cycle look like for an online store?
| Step | Typical timing | Cash effect |
|---|---|---|
| Supplier deposit | 8 to 12 weeks before sale | Cash out |
| Supplier balance and freight | 3 to 6 weeks before sale | Cash out |
| Ad spend | On the day the ad runs | Cash out, immediately |
| Customer pays | On order | Held by processor or marketplace |
| Payout to you | Days later, longer for new accounts or marketplaces | Cash in |
| Refunds and chargebacks | Days to weeks after | Cash out |
Notice that ad spend is the one cost that is paid at the same time as the sale and not before it. That makes it the one lever you can switch off if cash gets tight, while stock commitments are largely fixed once ordered. A forecast that separates committed costs (stock, freight, platform fees) from adjustable costs (ads, new listings) shows where you can flex.
How does GST change an online store’s numbers?
GST affects pricing, cash and compliance, and for imported goods, it has its own rules. The ATO’s guidance says GST has applied since 1 July 2018 to sales to consumers of imported physical goods valued at $1,000 or less. Where those goods are sold through an electronic marketplace, the platform operator can be the party responsible for collecting GST instead of the merchant. Registration is required once your GST turnover reaches $75,000 in a 12-month period.
Three practical points follow:
- Price includes GST for domestic sales. If you sell at $60 and are registered, a portion of that belongs to the ATO. Our GST calculator separates the two.
- GST is collected before it is paid. It builds up in your account between BAS dates, so a busy quarter can produce a large bill. The GST accounting basis you choose, cash or non-cash, changes when you report it, and the ATO says a small business under $10 million in aggregated turnover can generally pick cash. Ask your accountant.
- Marketplace settlements may net off fees, refunds and tax. Your bank deposit is not your revenue. Reconcile each settlement to the sales behind it, or your BAS will be wrong.
For setting GST money aside as sales happen, see the GST cash flow tips.
What gets underestimated?
- Return rates. Apparel, footwear and anything with sizes can come back at far higher rates than electronics or consumables. Each return costs freight twice, handling, and possibly the item itself.
- Chargebacks. A disputed card payment can claw back the sale and add a fee.
- Seasonality. Many stores earn a large share of their year between Black Friday and Christmas, with stock for that period bought in mid-year. See retail stock funding before Christmas.
- Ad cost creep. The cost to acquire a customer tends to rise as you scale. A campaign that was profitable at $5k a month may not be at $25k.
- Dead stock. Slow lines tie up cash. A store with $80k of stock that has not moved in six months is less liquid than its sales suggest.
What funding suits an online store?
Banks are often the cheapest funding for stores with a few years of steady trading and sound financials, and a business line or overdraft is the natural product. If your bank offers terms that fit, take it seriously.
If the bank has said no, or the store is too new, or the stock peak outruns the limit, the usual alternatives are:
| Option | Suits | Watch for |
|---|---|---|
| Business line of credit | Flexible stock and ad spend with seasonal swings | Limit reviews; costs on drawn amounts |
| Working capital loan | A single large stock order | Repayments start before the stock sells |
| Revenue-based finance | Stores with steady, predictable sales | Total cost in dollars; effect on slow months |
| Trade finance | Importers paying overseas suppliers | Shipping times and documentation |
| Merchant cash advance | Short, specific needs | Daily repayments against thin margins |
| Property-secured loan | Larger limits, lower cost, if you have equity | Putting property at risk for stock |
The principle is to match the funding to how fast the stock sells. A line that you draw for a month and repay from sales is a very different tool from a loan that must be serviced whether or not the stock moves. For a deeper look at growth funding, see scaling an online store.
What do lenders look at in an ecommerce business?
They want evidence the sales are real, repeat and profitable. Expect to provide:
- bank statements that show processor or marketplace settlements;
- platform reports covering sales, returns and refunds;
- profit after product costs, freight, ads and fees;
- a stock list with ageing;
- supplier invoices and lead times;
- BAS and financial statements;
- ABN registration details and the length of trading.
A store that can show a repeat customer rate, stable margins after ads, and a stock turn figure is much easier to fund than one that can show only top-line growth.
A worked example
This is an illustration only. A home and giftware store sells about $40k a month at a 45% gross margin after product cost and freight. It plans to double stock for the Christmas period.
| Item | Amount |
|---|---|
| Extra stock ordered in August | $60,000 |
| Extra freight and duties | $9,000 |
| Extra ad spend, October to December | $18,000 |
| Cash needed before the peak pays out | $87,000 |
The owner has $25k of spare cash. The peak sales arrive in late November and December, and processor payouts follow a few days after. So the gap of about $62k lasts from August to early December, roughly four months.
A business line drawn as stock is paid for and repaid as December sales settle would suit that. The cost is a few months of funding on $62k, against the extra margin from the peak. A long-term loan would leave repayments running through January and February, when sales fall away. If the numbers look like this for you, a one-minute enquiry is a sensible first step.
How can you protect cash day to day?
- Reconcile settlements weekly. Match payouts to orders so you know your true position.
- Hold a returns reserve. Park a percentage of each week’s revenue for refunds.
- Order in tranches. Splitting a stock order across shipments reduces the cash out at once.
- Set an ad ceiling linked to cash. Reduce spend automatically if the balance falls below a floor.
- Review slow lines monthly. Discount, bundle or clear stock that is not moving.
The inventory and cash flow guide shows how to measure it.
Is your next order ready to be funded?
If you can see a stock order or a campaign that the account cannot carry, ask before the supplier deadline, not after. A few days of lead time usually makes the difference between a good facility and a rushed one.
Our enquiry form takes about a minute, and filling it in leaves your credit file alone. We keep your details with us rather than sending them to a long list of funders, so your phone will not start ringing. One of our team reads your details and calls you. Give us accurate figures for monthly sales, stock needs and trading history, so the first option we suggest is the one that fits.
Frequently asked questions
Why does my online store run out of cash when sales are up?
Growth requires more stock, more ads and more freight before the matching sales are paid out. If it takes 60 days to turn a supplier payment into customer cash and your sales double, you need roughly twice the working capital. Profit on paper does not help until the cash cycle completes.
How long do payment processors take to pay out?
It varies by provider, account age, risk profile and bank. New accounts can face a holding period before the first payout, and weekends and public holidays add days. Check your own processor's current payout terms and build the delay into the forecast, rather than assuming same-day money.
Do I charge GST on products I import and sell to Australians?
If you are GST-registered and sell to consumers, generally yes. GST has applied to imported physical goods valued at $1,000 or less sold to consumers since 1 July 2018, and where an online marketplace handles the sale it may be responsible for collecting it. Registration is required once your GST turnover reaches $75,000. Confirm your position with the ATO or your accountant.
Can an online store get finance without property?
Yes. Lenders look at trading history, bank statements, platform sales data and stock levels. Unsecured options and revenue-based facilities exist. Property security can lower costs and raise limits, but is not required for most stock and marketing funding.
Is a merchant cash advance a good idea for an ecommerce store?
It can work for a short, specific job, but repayments come out of daily sales, which can strain a store with thin margins or seasonal swings. Compare the total cost in dollars with alternatives, and think about what happens to cash in a slow month.
What should I show a lender if I sell through marketplaces?
Bank statements that show settlement deposits, platform sales reports, a view of returns and refund rates, supplier invoices and a stock report. A lender wants proof that the sales are real, repeating and profitable after ads and freight.