Chapter 6 Flashcards
(27 cards)
in online business
refers to the strategic planning,
organizing, controlling, and monitoring
of financial resources and activities that are
important for the success and
sustainability of a digital or e-commerce
enterprise.
Financial Management
IMPORTANCE OF FINACIAL
MANAGEMENT IN ONLINE BUSINESS
> Ensures cash flow sufficiency
Helps in investment decisions (ads, tools, inventory)
Assists in pricing and profitability strategy
Prepares the business for taxes and legal compliance
It includes managing the business’s
financial operations such as budgeting,
pricing, investment, payment systems,
cash flow, profitability, record keeping,
and compliance with tax and legal
regulations, all in the context of a digital
environment.
FINANCIAL MANAGEMENT
FINANCIAL MANAGEMENT
1.Financial Planning and Budgeting
2. Pricing Strategy and Profitability
3. Cash Flow Management
4. Financial Reporting and Monitoring
Online entrepreneurs must prepare for startup costs, operational
expenses, and scaling opportunities. A well-planned budget
ensures they do not overspend or run out of funds.
LFinancial Planning and Budgeting
Choosing the right pricing model ensures competitiveness and
profit. Profitability analysis tells a business if they are truly making
money or just covering costs.
Pricing Strategy and Profitability
Managing cash inflows such as sales, affiliate earnings and outflows
like expenses, and marketing costs to ensures the business remains
solvent and can meet its obligations on time.
Cash Flow Management
Tracking financial data through reports like income statements,
balance sheets, and cash flow statements helps in making informed
decisions.
Financial Reporting and Monitoring
In a business context,
“______” means a
business has the __________________________ and liabilities as they come due.
solvent
financial ability to meet its
obligations
PRICING STRATEGIES
Cost-Plus Pricing
Value-Based Pricing
Competitive Pricing
Subscription Pricing/Freemium Pricing
Pricing method where you add a fixed percentage or markup to the
cost of the product or service.
Formula:
Selling Price = Cost + (Cost × Markup Percentage)
If a T-shirt costs ₱200 and you apply a 50% markup, your selling
price would be: ₱200 + (₱200 × 0.50) = ₱300
Cost-Plus Pricing
Prices are set based on the customer’s perceived value rather than
the actual cost.
A graphic design template created in Canva may cost only ₱100 to
make, but can be sold at ₱1,000 if users perceive high value in
design and usability.
Value-Based Pricing
Pricing based on what competitors are charging for similar
products.
If other online sellers price their handmade soaps between ₱150–
₱180, you might set your price at ₱160 to stay competitive.
Competitive Pricing
Customers pay a recurring fee on weekly, monthly, or annually basis
to access a good or service. Basic services are free, while premium
features are paid.
Subscription Pricing/Freemium Pricing
TYPES OF CASHFLOWS
Cash Inflows
Cash Outflows
Cash Inflows
Product sales
Subscription fees
Affiliate commissions
Returns from investments
Cash Outflows
Inventory and supplier costs
Platform and payment fees
Ads and marketing spend
Tools and software subs
CASHFLOW MANAGEMENT
STRATEGIES
> ACCELERATE CASH INFLOWS
DELAY OR SPREAD OUT CASH OUTFLOW
KEEP A CASH RESERVE /BUFFER FUND
REGULARLY MONITOR AND FORECAST CASH FLOW
OPTIMIZE INVENTORY MANAGEMENT
CONTROL OPERATIONAL EXPENSES
INCREASE REVENUE STREAMS
USE TECHNOLOGY FOR AUTOMATION
Offer incentives for early payment, discount for upront or early
payment.
Use reliable and fast payment gateways like GCash, PayPal, or
PayMongo to speed up transfers.
Encourage digital payments over cash on delivery to reduce
delays in receiving payments.
ACCELERATE CASH INFLOWS
Negotiate payment terms with suppliers. For example, 30-day
terms instead of immediate payment).
Schedule payments smartly to align with expected inflows.
Use business credit lines or revolving funds to cover short gaps
in cash flow.
DELAY OR SPREAD OUT CASH OUTFLOW
Set aside a percentage of income as an emergency fund,
recommended is 10–20%.
Helps manage slow sales periods or unexpected expenses like
equipment failure, shipping delays.
KEEP A CASH RESERVE /BUFFER FUND
Forecast Cash Flow
Use tools like Google Sheets or Wave to project monthly cash
inflows and outflows.
Track actual vs. projected to adjust plans.
Spot cash gaps early and make informed decisions.
REGULARLY MONITOR AND FORECAST CASH FLOW
Avoid overstocking products to reduce storage costs
and tied-up capital.
Use just-in-time systems if possible to maintain lean
inventory.
OPTIMIZE INVENTORY MANAGEMENT
Retail point of sale hardware
Barcode scanner
Cash drawer
Keyboard
credit card terminal
Barcode label print
Receipt printer
POS display
