Ecommerce Wizards Podcast · 2023-06-08 · 16 min
Key moments - from our scoring
Substance score
47 / 100
Five dimensions, 20 points each
The cash conversion cycle (CCC) measures how long capital sits tied up between purchasing inventory and collecting customer payments. For an eCommerce business doing $7-8 million annually, shortening the cycle by just two days can free up $200,000 in cash. Matt Putra demonstrates this through the "nibbles" framework - coined by his business partner Kevin Shantag - which involves making small, repeated asks across four levers: negotiating extended payment terms with suppliers (requesting 1-2% discounts for 30-60 day terms instead of asking for large discounts), collecting deposits or pre-orders from customers (even 10-20% upfront significantly accelerates cash collection), reducing inventory costs through incremental negotiations, and increasing average order value through strategic cross-selling and bundling. The episode covers practical tactics like partial pre-orders for limited products, subscription or membership models for reserved inventory, and leveraging post-checkout upsells (which can drive 10-30% order bumps). Putra also addresses inventory management - warning against overbuying in uncertain markets and suggesting alternative customer acquisition strategies like gift bundling rather than heavy discounting. The discussion emphasizes that doubling a business's bottom-line profit doesn't require doubling revenue; systematic 15% improvements across multiple efficiency levers can achieve substantial profitability gains.
The cash conversion cycle is the time between paying for inventory and collecting cash from customers. Shortening it is critical because even small reductions (2 days) can free up six figures in cash annually, improving monthly cash flow and reducing financial strain regardless of business size.
Use the 'nibbles' strategy: ask for small, incremental improvements like reducing a 30% deposit to 25%, or offering an extra 1% payment to get 60-day terms instead of net-30. Repeat these small asks every few months with consistent suppliers - they're manageable requests that add up significantly over time.
Offer pre-orders, partial deposits (10-20%), or memberships that let customers reserve inventory before shipment. You can also use gift bundling and strategic cross-selling at checkout - these tactics accelerate cash collection without requiring 100% upfront payment.
Deploy post-checkout and sidebar upsells (like Monos Luggage does), offer strategic cross-sells based on the product category (e.g., suggesting pipes and glue to bathroom renovators), and use gift bundling. These tactics can drive 10-30% order bumps while adding genuine value to the customer experience.
Excess inventory ties up capital that may never return, especially in uncertain markets; unsold stock often requires fire-sales at 50% losses. Buy conservatively, allow some SKUs to sell out just before new shipments arrive, and consider using excess inventory for customer acquisition through gifting rather than steep discounting.
Our reviewer’s read on each dimension, with quotes from the episode.
The episode delivers a handful of usable CCC tactics (supplier deposit negotiation, extended payment terms for a fee, pre-orders, inventory discipline) but pads heavily with a tangent on cross-selling, a mid-episode ad read, and repeated restatement of the $200K example. Insight rate is moderate at best for a 16-minute runtime.
I went to another supplier and I said, if I pay you an extra 1%, can I have 60 day payment terms?
shortening the cycle by two days created an additional 200,000 in cash at the end of the year
The 'nibbles' framing is a mildly fresh way to articulate incremental negotiation, but the underlying advice - negotiate payment terms, collect faster, reduce inventory, upsell - is standard ecommerce and supply-chain finance content with no contrarian or first-principles angles.
Kevin says, take nibbles. So don't ask for, can I have 20% off on your inventory? No. Can we do 5%, right? And three months later, hey, can we do another 5%?
Can you pay just a little bit later? Can you collect just a little bit earlier? Can you pay a little bit less? Can you collect a little bit more?
Matt Putra is a legitimate fractional CFO with real ecommerce clients and firsthand supplier negotiation experience, which grounds his advice; however, he is not a scaled operator or senior finance executive at a notable company, and the depth of insight in this episode doesn't showcase exceptional practitioner knowledge.
one of the things I did with one of the companies that I own is I emailed my Chinese supplier
I looked at the cash conversion cycle for somebody who was doing about seven or eight million dollars a year in sales
The episode benefits from several concrete numbers - $7-8M revenue client, 2-day improvement yielding $200K, $500K/year supplier getting 30-day terms for 1% extra, $50 hoodie with $15-20 cost - but many figures are illustrative hypotheticals rather than verified client outcomes, and the cross-sell and inventory sections stay vague.
I spent 500 grand a year with them, but I got a whole 30 days
two-day change in the cycle was $200,000
The host rarely asks probing follow-ups, mostly affirms what the guest says, interjects with his own Monos checkout anecdote, and allows the conversation to drift significantly from CCC into cross-selling and giveaways without redirecting. There is no pushback or challenge to any claim.
I can tell that you really understand the customer journey because this checkout with Monos was probably the most beautiful checkout experience that I've had in like two years
Guillaume, do you know if there's one? For small prepayment, not too sure. Just not specifically for that, no.
Computed from the transcript - who did the talking, and the words that came up most.
Matt Putra is an experienced financial executive with a long career spent with small businesses and conducting long-term forecasting for ecommerce brands. He is a Fractional CFO for EightX, a company specializing in predicting the pattern, future, and profit for businesses in any industry. Matt has worked with many businesses, including Tru Earth, The Tumeric Co., Lusomé, Community Forward Fund, and New Market Funds. Additionally, he works closely with entrepreneurs to help them establish new businesses. In this episode… The Cash Conversion Cycle (CCC) is a metric that many businesses don't consider enough. How many days does your ecommerce business take to convert sales into cash? Cash is everything for ecommerce businesses. Sales are essential, but cash management is even more important for long-term health. Many young companies neglect this aspect and suffer in the long run, leaving potential growth on the table or burning out. A handful of incredible tips can help online brands shorten their CCC. Guillaume Le Tual again joins Matt Putra, a Fractional CFO at EightX, to discuss CCC in-depth and what ecommerce businesses should improve about their process.
Transcribed and scored by The B2B Podcast Index.
Hello everyone Guillaume Rizval here host of the eCommerce Wizards podcast where I feature leaders in eCommerce and business. If you're an eCommerce store owner or if you're involved in the finances of an eCommerce store this episode is for you. Today's guest Matt is a CFO, a Chief Financial Officer specialized in eCommerce so he has all kind of techniques optimization tricks that he can teach you to improve the company's finance make the entrepreneur more wealthy more successful just makes the situation more pleasant to be in by optimizing cash flow, cash conversion cycles, by improving how we structure financial deals and so on.
This is a very interesting episode if you're in the finance or entrepreneurship space for an e-commerce store. Today's guest is Matt Putra. He's here for a second episode together today. He's the founder of the company 8X.
He's a fractional CFO, Chief Financial Officer, and an expert in e-commerce. So that's his area of expertise. You have a full intro about him in the first episode. So this second one here will be somewhat short.
It's about cash management for e-commerce store owners, merchant, more specifically, a method to shorten the cash conversion cycle, sometimes called CCC. So, Matt, thanks for being here again. You're welcome. It's great to be here.
All right, let's jump right into the topic. How do we shorten the cash conversion cycle? And what's that in the first place? And why should you care as a merchant?
Got it. So cash conversion cycle is a measure of how long it takes from the time you pay for inventory to the time you collect cash from your customers. It's a complex calculation, but very simply, if you think about it in this way, I pay for my inventory in month zero. I sell it in month two and I collect the money in month three.
So then you have a 90 day cash conversion cycle, basically. Now, shortening it is unbelievably important and it's really, really effective. I looked at the cash conversion cycle for somebody who was doing about seven or eight million dollars a year in sales. Shortening the cycle by two days created an additional 200,000 in cash at the end of the year that we were forecasting for.
So it is very effective to put attention against this metric. And here are some ways to shorten the cycle. So when you think of, look, paying for stuff, selling, collecting it, well, what can you do? Well, push those timelines together.
So when you order your PO from, let's say, China, one of the things I did with one of the companies that I own is I emailed my Chinese supplier and I said, hey, instead of 30% deposit, can I have 25? They said, yeah, of course, the problem. it's a very, very small ask, but a number of small asks will add up to those two days and 200 grand. So I asked him, hey, 25%.
He said, yeah, no problem. I went to another supplier and I said, if I pay you an extra 1%, can I have 60 day payment terms? He's like, and these people were like, yeah, no problem. And I spent 500 grand a year with them, but I got a whole 30 days.
So now what's happening is I'm buying the stuff and I'm starting to sell it before I pay them. other things you can do is obviously you can reduce the cost of your inventory can you negotiate even five percent small small ask somebody a good very good friend of mine and business partner his name is Kevin Shantag he has this what he says is you take nibbles he's coined this phrase at least as far as I know it nibbles you ask for very small things at regular occurrences and they add up to a very important number, which is in this case, my other client, 200K.
So Kevin says, take nibbles. So don't ask for, can I have 20% off on your inventory? No. Can we do 5%, right?
And three months later, hey, can we do another 5%? And if you continue to buy with them typically those asks are manageable Instead of 5 you say look look I pay you an extra 1 for 30 terms Sometimes they bite on those things right So small, small, small nibbles will add up. On the collecting from customer side, well, can you do pre-orders? Can you do partial pre-orders?
Can you do deposits? Is there something in your product line where it's often limited or really sought after such that you sell out and you say, look, we have a shipment coming. It's two months. You can reserve your piece by paying 10% now or 20 or the whole thing.
Some people, it works for the whole thing. And when you do that, now you've brought your payment structure this way and you've bought your collection this way and you've shortened that cash conversion cycle. And like I say, you don't have to ask your customers for 100% up front, ask for 10. That's a nibble, but it's hugely, hugely effective.
Now, I don't know if there's an app that would handle this, the small prepayment. Guillaume, do you know if there's one? For small prepayment, not too sure. Just not specifically for that, no.
Right. So there are emerging options like subscriptions. You might talk to your community and say, hey, for X dollars a month, you can come in our site, reserve pieces that are coming on the boat so that they don't sell it. So you make sure you get an option.
That's an option. But anytime you're collecting money faster than normal, even if it's a little bit of money, and anytime you're paying a little bit later than normal, reduces the cycle. We just do it through normal accounting and voicing. Or if it's for the user interface and a bit of programming that they would have to deposit features.
Yeah, exactly. Or it could be a subscription, could be membership. And then there's obviously reducing the amount of cost of something or increase in the amount of collection. So can you reduce your cost of cost sold?
Can you increase your AOV? Both those things will help. And again, I'm not saying take your AOV from 100 to 150. Average order value.
Sorry, sorry. Average order value. I'm saying take your average order value from 100 to 105. That's a great place to start.
5% is huge when you look at how many thousands of orders you're going to get in a year. So go through your business. Can you pay just a little bit later? Can you collect just a little bit earlier?
Can you pay a little bit less? Can you collect a little bit more? Those kind of four, I don't know if it's quadrants. I just thought of this right now.
But those four things, small, small steps in each of those four things, systematic and tracked. So make a spreadsheet, put the headings for the four things, put some ideas and start asking people, can this, can I do that? Can I do this? Can I do this?
Track which ones are working and then repeat the process every couple of months. review that sheet, review the four things, and just, again, take nibbles every three months, and you'll be so surprised at the amount of cash left over in your business. Like I say, this one client, two-day change in the cycle was $200,000. Yeah.
Another thing to keep in mind is if you want to double the bottom line, the profits, you don't need to necessarily double the top line because you have your costs and all that. So let's just a simple example, the $1 million business that has a 20% net profit after taxes. So they have 200,000, but it means to run the whole business, it costs you 800,000. But once that cost is already covered, to double your profit, maybe all you need is to reach 1.
3, 1.4. You don't need double if you can increase in the efficiencies a little bit everywhere. Can you increase the price like 10%, 12%, 15%?
Can you bundle that presented differently? Can you add something of value so they're willing to pay 15% more, can you reduce your cost 15%? Can you improve your cash collection version cycle 15 So just like you say small improvements of about 15 everywhere you will double the whole business profitability When you would know about post or I don know what you call them but in the cart and then on your way to the checkout like you have those I just checked out with Manos Luggage the other day and I hit the button to add to cart and this sidebar pop up said, hey, by the way, these few things that aren't that expensive really go well with what you're buying.
Yeah, cross selling. like cross-selling. And then right after I finished the checkout, they said, look, there's another chance. There's a couple of things that might make sense.
Do you want to do it? And I mean, it was a wonderful flow, but you're probably taught, and you might have some stats on this, but you might be looking at a 10% order bump. It could be more, it depends what you're selling, but it can be way more than 10%. You can have like all the way 30%.
If anything from the impulse buy to actually truly giving value to the customer. And if you have something complicated, like some kind of online hardware store. Okay, what's your project? You want to renovate something in your bathroom?
Okay, well, you've only bought the sink. Did you think about the pipes? Do you have the glue for the black pipes? Do you have this?
Do you have that? So you can suggest them sort of a better combination of the related products that people will typically buy. And it's almost like giving them a checklist, like to do that project, this is what you need. You already have it at home for DIY setting, or do you need it?
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com. You know. Yeah, so I mean, I can tell that you really understand the customer journey because this checkout with Monos was probably the most beautiful checkout experience that I've had in like two years. And what you're saying was exactly what it was like.
It was like, look, you're traveling. here's some stuff that would make your traveling a bit easier and it was like they just knew what I needed and what I really wanted it was awesome right yeah so it's a mindset of truly helping and truly giving value to the person not trying to just shove them a sale yes exactly yeah totally and one more thing I'll add about cash conversion cycle we talked about pay slower collect faster pay less collect more the last thing is hold less inventory when you inventory stale inventory is a killer if you buy stuff that doesn't move oh it hurts because it's just these dollar bills sitting on your shelf you'll just sometimes never get back unless you fire sale it or you'll you'll burn half of the stack because you have to get rid of it so um especially this year by conservatively um selling out is a problem very big problem for Amazon, less so for Shopify.
So there might be some skews that you would allow yourself to sell out of, or at least sell out of just before the shipment's coming. Be very careful with inventory this year. We don't know what consumers are going to do. Consumer confidence is struggling.
And so if you think about 2021, it was a great year, but it's not that year. Just buy carefully and you just don't want to get stuck with bags of money on your shelf that you can't move or that you have to throw half the bag in the garbage, right? Yeah, there were a few market vertical that stayed stuck at the end of the season before the winter. Like, hey, there's all that summer stuff we haven sold Unlike previous years we stuck with the X millions in inventory this year And then they like we want to fire a salad But then as you said it like a pile of money You burn half to get rid of it It like oh not sure And then they say with all the disruption in the supply chain right now, do I even like, I don't know what will be my cost to resupply my store with all that inventory.
So some of them say, well, maybe I'll just sit on it for now and liquidate it more slowly if they can afford to do so. Because, you know, you don't know the future about resupplying in some of the vertical, some other is more safe, especially if you have like continental inventory resupplying that's not involving too much tech piece and overseas shipping. Yeah. And if you're in a position where you're stuck with too much inventory, talk to the marketing team, talk to some other experts of what you're going to, like I'm not necessarily growth and sales expert, but can you, and without discounting, can you give stuff away?
Like your CAC for most people is minimum a third of your average order value or sorry if your customer acquisition costs sorry I was about to say it yeah your customer acquisition cost is minimum a third of your average order value for most people can you just give stuff away like if you give stuff away let's say you you have a you have a customer that buys from you like look here's another thing that you can send to a friend for free and you have a gift card on it well now you might have a customer just got a gift for free you would have paid x dollars to acquire them but if you send them a free item that's sitting on your shelf, maybe that's a way because they're going to get, let's say it's a shirt, $50 hoodie.
I'm going to get a $50 hoodie from my friend. And with your gift card on it, the hoodie costs you $15, $20, but the value to me is $50. So what's your actual cost of acquisition? Well, that's an interesting opportunity for some people.
Yeah, the giveaways and bundling. And if you're a retailers selling same stuff as everybody else. There's no branding differentiation there. It's not your own brand label.
Sometimes it comes back to how much are you willing to pay to acquire a customer. And that can include adding gifts, choose your gifts on the checkout kind of deal. It's like, that's why I'm going to buy from you instead of buying from the other guy. The other guy doesn't give me a gift when I check out.
It's the same price, but I buy it from you. I have those three samples and I have this little thing with it that doesn't cost you too much. Absolutely. So yeah.
Cool. Okay. Hey, pretty good coverage of the cash conversion cycle. Fancy terms, very simple.
You spend money to buy anything, inventory services, pay employees. How fast does the money come back in your company? The faster, the better. And it makes a big difference to your financial result and how easy it is to run the business because if it's too long, that cash conversion cycle, you're going to feel more strapped in the cash flow monthly.
No matter how many zeros that business has, it is true because it's going to scale with the size you're at, seven figure, eight figure, nine figure. If the cash conversion cycle is not good, it can totally create a big problem in the cash flow, even for the large companies. So very important concept there to optimize. Thank you.
Yeah, that's great. All right, Matt, if somebody wants to get in touch with you, what's the best way? Yeah, you can check out my website, www.adex.
co, E-I-G-H-T-X dot C-O. LinkedIn is a really great place. If you're looking to hear back from me within like a day, man, LinkedIn, find a post, comment, ask a question. I'm happy to chat.
I answer lots of questions all the time. And you kind of get, if you follow me on LinkedIn, you get to kind of see what I'm about, how I think. And, you know, eventually you might decide, hey, I'm going to ask a question. But that's, those are the best places to find me.
All right. Thanks for being here, Matt. Thank you so much, Guillaume. I really appreciate it.
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