Ecom CFO Notebook - cashflow automation

Welcome to this issue of Ecom CFO Notebook – a weekly letter for 7–9 figure ecommerce founders and CFOs, sharing my perspective and stories for profitable growth.

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Sam here.

If the floors of your home are covered in clutter, buying a Roomba won’t solve your problem. 

That’s how I think about automation with cash flow forecasting.

We can't automate chaos. Need baseline organization first—transactions flowing through an accounting system at least weekly, books current, basic structure in place. Without that foundation, automation solves nothing.

But assuming the basics are handled (refer to parts 1, 2, and 3 of our cashflow series if you haven’t already), then automation does one thing really well: gets you to the answer faster, freeing up time for decisions instead of data gathering.

What automation actually means

There's a difference between automated and streamlined.

Automated means the data flows in automatically. Click refresh and everything updates without manual intervention.

Streamlined means the processes are more efficient, but still require some human input and judgment. Things like revenue forecasts, purchase orders, and clearing the AP inbox need someone making decisions.

So what we're really talking about here is automating some elements and streamlining the rest. Not everything can or should be fully automated.

The accounts payable example

Here's how this plays out with accounts payable.

The streamlined part is still human. Someone needs to review incoming invoices to make sure they're legitimate. Maybe a contractor sent three invoices for the same period. 

Validate that these are actual obligations the business owes and not an invoice from "Dan Smith" instead of "Doug Smith" that gets approved for $15K to the wrong person.

This requires judgment, which is why it can't be fully automated.

But once the invoices are validated and approved in the AP system, automation takes over. Click one button and all the accounts payable in the cash flow forecast updates automatically. It shows when payments are due and how much cash goes out each week across all 13 weeks.

Without automation, someone has to run the AP report, export it as a CSV, upload it to Excel, and either manually enter the data or create formulas to represent everything. With automation, it's one click.

We all love benchmarks so I’ll give you a rough estimate…A weekly cash flow forecast update should take one to one and a half hours max when properly automated and streamlined. Without it, I’ve seen analysts spend close to 10 hours trying to put this together every week.

That time difference matters for whether this actually happens consistently or becomes another thing that falls off the list when things get busy.

What stays human (and why)

Revenue forecasting can't be and should never be automated.

There are too many human inputs and variables. Ad spend can swing revenue dramatically. New product launches. A viral ad blows up projections overnight. Meta shuts off the account and revenue drops to near zero. Opening up a wholesale channel.

While a grocery store knows within 5% what revenue will be next month, an omnichannel ecom business does not.  Turn off ads and revenue tanks immediately. Launch a new product and it spikes. Customer acquisition costs shift based on creative performance.

This is tough for founders to forecast themselves, so there’s no way a tool can automatically forecast that with any real accuracy. 

Building trust takes time

We are all looking for the silver bullet and quick ways to “set it and forget it”. But automating and streamlining this process doesn't work instantly. 

I’ve seen from our clients that it takes about four to six weeks to build real confidence in the forecast.

We will begin setting things up and the first three or four meetings usually involve finding issues. Missing invoices. Systematic problems in how data flows. Learning business nuances that don't show up in the accounting system.

It's never perfect the first time, but the data gets cleaner over time as the team learns what to look for.

The other key requirement: the executive team needs to show interest in understanding how the process works. 

There’s no need to do it all by themselves, but it’s important to understand the basics of where data comes from and how it flows so they can make decisions with confidence. 

What this actually enables

The forecast usually isn't telling someone something brand new. It's validating what they already feel intuitively.

Owners know when cash is tight. They know when they're in good shape. The forecast gives them the data to back up that gut feeling and more importantly, the confidence to act on it.

That validation matters, especially on the positive side.

It gives confidence to take money out of the business. Buy that house. Hire that person. Make that big inventory purchase.

I just started working with a new client who needs to place a $1M+ inventory order. They're pretty sure they can afford it, but they don't actually know. 

So they're stuck either placing the order and hoping everything works out, or pass on it and potentially miss out on growth.

Without the forecast, it's a guess. 

With it, we can say exactly what has to be true for this to work. Revenue needs to hit at least $X over the next 8 weeks. The marketing budget should stay at current levels. No surprise expenses over $Y can pop up. The supplier terms must stay net 60.

If all those things hold, the order works and cash stays above the minimum threshold. If one of those assumptions breaks, then they can put a backup plan in place to split the order, negotiate different terms, etc.

That's the difference between making decisions based on hope versus making them based on data. 

The forecast shows what has to be true for the decision to work, and what to do if it doesn't.

Wrapping up cashflow: the whole point

Parts 1 through 4 of this series covered a lot from building the forecast, understanding the mechanics, making decisions, and automating parts of the process.

But the whole point comes down to one thing: replacing hope with reality.

Without the forecast, decisions are guesses. Place that inventory order and hope it works out. Cut expenses and hope it's enough. Scale up and hope the cash holds.

With the forecast, it's data. Know the maximum cash deficit. Know when it hits. Know what has to be true for decisions to work. Know what to do if assumptions break.

That's realism as a strategy instead of hope as a strategy.

Next week we're getting into treasury management. 

For companies sitting on extra cash at the end of Q4, what should actually be done with it? The yield game, the credit card game, the trade-offs nobody talks about. How to think about optimizing cash that's just sitting there.

Let me know what you thought of this series! Is there anything else top of mind for you heading into the end of the year?

Thanks for reading, talk to you next week.

— Sam

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