How to manage cash flow, according to DTC finance expert David Whitcroft

Entrepreneurs launching new ecommerce and consumer brands aren’t typically accountants. But, in David Whitcroft’s experience, appropriately leveraging accounting best practices and managing cash flow is where brands live and die.

Full Stack Finance is composed of established accounting, finance, and HR professionals with over 500 clients that span ecommerce, SaaS, and consumer tech. Their consumer and ecommerce client roster includes household names like goop, Coterie, Lalo, Maude, and more.

We sat down with David Whitcroft, Full Stack's Head of Consumer and CFO, to dive deep on the financial best practices ecommerce brands need to abide by to ensure long-term success. 

Get your DTC finances straight from day one

It's never too early to get your books right – especially as an early-stage ecommerce brand.

David often sees young companies try to save money and cut corners by utilizing haphazard financial management products and services — a choice that almost inevitably negatively impacts a brand’s growth and profitability. 

Implementing accounting and financial best practices as early as possible saves entrepreneurs numerous headaches and challenges down the line. 

For example, by shifting a founder’s focus from inputs (like bank and credit card statements) to outputs (like cash flow management, financial health, and forecasting) allows an entrepreneur to be more strategic and proactive with their business.

"Brands outgrow their legacy financial tools much faster than they expect. Relying on lower quality tools can significantly hamper a growing business’s trajectory."

Best practices for managing early-stage accounting & finance blockers

In David's words, “We imagine scaling puts more money in our bank accounts — when in reality, growth requires a fast cash conversion cycle, which is extremely difficult to achieve.”

That’s because an ecommerce brand’s cash conversion cycle is typically long as brands buy inventory, marketing, etc long before a product is sold and they are paid back. 

Working capital is essential – yet complicated

To illustrate this point, let’s say a brand puts a dollar into inventory. 

The entrepreneur hopes they get paid two dollars when that inventory sells, but until then, they have to carry the cost of that first dollar. The longer that first dollar remains unpaid, the bigger the drag it has on the business as the entrepreneur is unable to invest that same dollar in other business needs like more inventory, advertising, store expansion, salary, etc. 

This familiar cash crunch demonstrates why brands live and die by how well they manage their cash flow. From David’s lens, this is exactly why a tool like Highbeam, that allows brands to manage their cash flow and unlock working capital, is so critical. 

"Working capital is absolutely critical. Why? Because growth is expensive for every brand out there. Modern tools like Highbeam can help you navigate the working capital ecosystem with ease."

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Tactical advice for navigating financial growing pains

David broke down some of his advice — ranging from high-level to nitty-gritty — on overcoming common accounting and finance roadblocks as a startup. 

1. Supplier financing

Working with your supplier for favorable financing is the first place to start. 

Having said that, without a mature relationship or consistent sales, getting a supplier to provide a brand with a favorable line of credit can be tough. 

2. Avoid the merchant cash advance (MCA) trap

MCAs are simultaneously one of the most utilized and least understood financial products. Their convoluted fee structure is by design.

Deciphering the cost of capital, even for finance professionals, can be unclear. While they appear to have “low” fees of around 10%, due to the rapid payback period MCAs require (often 15 weeks), brands frequently end up paying an equivalent APR of over 80%.

Early-stage brands need to evaluate MCAs on an ROI basis to ensure they fully understand the terms of the loan. In David’s words, this is where Highbeam’s credit comparison tool can help brands choose the best option for their needs.

3. Choose the right bank for your startup

Brands should look for a bank that deeply understands the unique needs of both startups and the ecommerce business. Before modern banking partners like Highbeam, ecommerce founders were stuck with either: 

• Traditional banks, which didn't understand the category or industry
• Institutional startup banks, which frequently fail to deliver the needs of a scaling brand

The ability to find a specialized, hands-on bank that fully understands and works with your cash flow needs is paramount. 

"Before modern entrants like Highbeam, you were stuck with traditional banks that don’t understand your business or institutional startup banks that may not deliver on what you need. For emerging brands, Highbeam makes a lot of sense."

4. Strong cash flow management = stability

In other words, the better you know your short-term cash needs, the more security you have. 

Startups, in particular, can be profitable as well as cash-negative. Meaning, you can be profitable while running out of cash. That's why it's critical to have a service to monitor your cash flow and ensure you stay in the clear.

Highbeam’s real time monitoring and actionable insight capabilities gives founders genuine, well-informed control over their businesses. 

"Inventory is kryptonite for a business, and cash is its lifeblood. Balancing those two variables is critical. If you balance them well, your brand will be in safe hands."