Working capital in e-commerce has a way of messing with your head.
You can have a strong brand, healthy margins, and steady demand... and still feel like you're one inventory delay away from a cash crunch. Not because you're doing anything "wrong." Because the timing is brutal. You pay suppliers early, you wait on payouts, and your marketing engine doesn't pause just because your cash cycle is having a bad week.
I saw this long before Paperstack existed.
When I worked in banking, I kept seeing profitable consumer brands get declined for financing. The businesses were real. The customers were there. The cash flow was there. But traditional underwriting was built for asset-heavy industries. Factories. Equipment. Collateral. Not asset-light e-commerce or modern CPG.
One example that stuck with me was a DTC beverage brand doing over $3M in annual revenue. Great margins. Strong sell-through. Cash flow that made sense if you understood commerce. The bank saw seasonal swings, outsourced manufacturing, and marketing spend that looked like "expenses," not an investment engine. Declined.
That's what I mean when I talk about systemic lending gaps.
So let's get practical. If you're the CFO of a growing e-commerce brand and you want working capital to stop feeling like a constant fire drill, this is the step-by-step plan I'd use. It's designed to be simple, repeatable, and grounded in how money actually moves through your business.
Step 1: Start with "cash flow quality," not a generic profitability story
In e-commerce, the real measure of resilience is cash flow quality.
Cash flow quality comes down to three things. Can you predict it? Can you time it? Can you sustain it when the business scales?
A P&L can tell you you're profitable. It won't tell you if you're about to hit a cash wall because Amazon holds payouts, a wholesale customer pays late, or your next PO needs a deposit before your last launch has fully settled into the bank.
You fix working capital faster when you stop asking, "Are we profitable?" and start asking, "How predictable is our cash, and who controls the clock?"
Build a timing map you can trust
I want you to map cash movement like a calendar. Not like a spreadsheet full of averages.
Write down, in plain language, when cash leaves and when cash arrives. Include supplier deposits, production lead times, freight timing, receiving, platform payout delays, wholesale terms, returns, and ad platform billing cycles. Then layer in seasonality. Not as a footnote. As a core input.
This is the part people skip because it feels operational. But this is where the truth is.
Step 2: Build one cash model that the whole leadership team uses
Working capital doesn't break because finance can't model. It breaks because the business runs on three different mental models.
Marketing is working off a growth plan. Ops is working off lead times and warehouse capacity. Finance is working off cash constraints. Everyone is "right," and the company still ends up squeezed.
You solve this by building one shared model and making it the source of truth.
I'm not talking about a perfect forecast. I'm talking about a forecast the team actually believes enough to use.
Make it weekly, not monthly
Monthly reporting is too slow for e-commerce. A lot can go wrong in two weeks.
When you move to a weekly cadence, you catch the problem while it's still a decision. Not a crisis. You see the cash gap forming earlier. You spot the inventory risk before it becomes an out-of-stock event. You can adjust spend before you're forced to slash it.
This is also where my community-building side shows up. Before Paperstack, I built Tea Club Toronto as a peer mentorship meetup for founders. It worked because people came into the room, got real, and aligned. Working capital needs the same energy. Put the right people around one model, and decisions get faster.
Step 3: Treat each sales channel as its own payment system, then roll it up
If you sell across Shopify, Amazon, and wholesale, you're not running one cash cycle. You're running three.
Each channel has its own payout rhythm, fees, and working capital pressure. Your bank balance is where all of it collides.
A common mistake is blending everything too early. The blended view hides the timing risk. It makes cash look "smooth" until it suddenly isn't.
Start by modeling each channel's cash curve separately. Then roll it up into one view so you can see where the gaps are coming from.
This matters for internal planning. It also matters when you're looking for capital. I've seen brands get pushed into fragmented financing because providers only underwrite one channel at a time.
We worked with a CPG brand like this. They had great repeat customers and steady month-over-month growth, but their revenue was spread across Amazon, Shopify, and wholesale. Other providers wanted to underwrite one channel or factor only wholesale orders. The brand ended up facing the idea of juggling multiple lenders with different repayment schedules.
We underwrote the total performance of the business and helped them consolidate into one clear source. That reduced operational pressure and gave the team space to focus on growth instead of repayment gymnastics.
Consolidation isn't just cleaner. It's safer.
Step 4: Stop treating "selling out" like a win
This is one of my most unpopular opinions, and I'm fine with that.
It shouldn't be celebrated when the product is sold out. Selling out is usually a financial failure or operational failure. Sometimes it's both.
When you stock out, you don't just lose sales that day. You lose momentum with loyal buyers. And you pay to rebuild the relationship with the customer later. That second cost is invisible on most dashboards, but it shows up in CAC. You end up paying more just to get back to where you were.
I've seen a brand get an unexpected viral moment during the holidays, run out of stock, and walk away with broken consumer trust instead of a clean "growth win." The spike looked great in the moment. The hangover was expensive.
Use inventory as a growth throttle
If inventory is tight, you need rules that protect the business from emotional decisions.
When you know you're facing delays, one of the smartest moves is to intentionally lower marketing spend and remove promotional discounts. You slow sales velocity on purpose. You protect availability for your highest-value customers. You buy time for supply to catch up.
That's not conservative. That's disciplined.
Step 5: Put marketing, inventory, and cash in the same conversation
Most e-commerce cash crises come from one root issue: timing misalignment.
Marketing is pulling demand forward. Ops is trying to land inventory on time. Finance is trying to keep cash from breaking. If those three aren't operating on one calendar, the business gets whiplash.
This is where I push CFOs to lead differently. Working capital is not a finance-only problem. You need a rhythm where marketing, operations, and finance review the same constraints and make trade-offs together.
When timing works, inventory turns faster, marketing converts efficiently, and cash recycles back into growth. When timing breaks, the damage compounds quickly. Inventory sits. Storage costs rise. Discounts get deeper. Margins get thinner. Then the team starts making short-term moves that hurt the brand long-term.
Marketing is a capital allocation decision
Marketing isn't a side expense in e-commerce. It's often one of the biggest uses of cash.
The 2022 Gartner CMO Spend Survey found marketing budgets averaged 9.5% of total revenue. In that same survey, 75% of firms increased their marketing budgets year over year.
In e-commerce, I often see brands invest even more. It's common to see 15% to 25% of annual revenue go into marketing, right alongside inventory and shipping as a top expense category.
So treat it with the seriousness it deserves. A dollar into ads is a dollar into working capital timing. If the product won't be in stock, or if payouts are delayed, your ad plan can turn into a cash trap.
Step 6: Get clear on what your unit economics are built to do
This is the clarity check that changes everything.
Your working capital plan depends on a simple truth about your business. Do you need profitability on the first purchase, or are you built to win on long-term LTV?
If you're built for first-purchase profitability, you need tighter control over contribution margins, inventory turns, and payback windows. You can't let promotional calendars drift. You can't let shipping and discounting quietly eat the economics.
If you're built for LTV, you can spend more aggressively upfront, but only if retention is real and repeat purchase timing is predictable. Your capital plan needs to fund that payback window without forcing you into panic cuts.
At certain stages, the right move is to intentionally decrease marketing spend and focus on upselling existing customers and increasing AOV. You stabilize cash flow while still growing value per customer. You earn the right to scale acquisition again.
Step 7: Use "unapologetic optimism" as a financial tool
Unapologetic optimism isn't about blind positivity. It's about discipline.
Volatility is part of commerce. Tariffs shift. Freight costs spike. Platforms change rules. Consumer demand swings. Your job isn't to pretend that won't happen. Your job is to build options so you're not frozen when it does.
We had a brand partner impacted by new import tariffs that increased landed costs overnight. Margins tightened fast. The instinct in that moment is to cut marketing and freeze inventory orders to preserve cash.
We took a different path. We ran multiple scenarios based on how tariffs could evolve and aligned a flexible capital plan that could adjust. That allowed them to keep ordering at scale and maintain supplier relationships while competitors hesitated. When the market stabilized, they were one of the few brands still fully stocked and captured meaningful market share.
That's optimism as execution.
Build scenarios to create options
Scenario planning doesn't need to be fancy. It needs to be honest.
Run a base case that reflects your real plan. Then run a downside that assumes revenue dips and costs tighten. Add an upside that assumes demand spikes and inventory becomes the constraint. Define what you'll do in each case before you're under pressure.
You're not trying to predict the future. You're trying to avoid having only one move.
Step 8: Match the right type of capital to the right job
Capital decisions get framed like price shopping. That's too shallow for e-commerce.
The real question is whether the capital fits your cash cycle. Traditional debt looks for collateral. Modern commerce needs capital partners who understand cash flow timing.
This is where banking models keep failing online brands. Asset-light businesses can have strong fundamentals and still get treated as risky because they don't fit an old template. I saw it repeatedly, including that DTC beverage brand doing $3M in revenue that got declined because it lacked hard assets and had seasonal swings.
As a CFO, you need to protect the business from financing structures that ignore how you operate.
I'm also very clear about how I think about dilution. Equity capital is used for R&D purposes and new product launches. Non-dilutive capital is for recurring expenses like inventory and payroll. Funding recurring needs with dilution becomes unsustainable faster than most teams realize.
There's a real-world exception for very early brands with no credit history, including some influencer-led brands. Sometimes the first inventory order is still an experiment, and equity is the only tool available. But once you have a track record, you want capital that supports repeatable operations.
Step 9: Draw capital in rhythm with your supply chain
A lot of working capital pain comes from one habit: taking capital as a lump sum.
You get approved for a large amount and you take it all "just in case." The pressure hits immediately. You're paying for capital that stays in the bank account unused. And your repayment schedule starts before the inventory has even arrived.
I use a personal analogy for this because it's so intuitive. Taking the full amount up front is like maxing out a credit card. You can do it. You just created unnecessary pressure on your daily cash flow.
Just because your business qualifies for a million dollars doesn't mean you have to take it all.
If your manufacturer requires 30% down, draw the deposit. Then wait to draw the rest when the goods leave the warehouse or hit a clear shipping milestone. You reduce cost. You reduce cash stress. You also make your forecast cleaner because the capital draw matches the operational event.
This one change can make working capital feel dramatically more stable.
Step 10: Due diligence non-dilutive providers based on structure, not the headline
Non-dilutive capital has exploded in e-commerce. That's good. It also creates confusion.
Many offers look similar on the surface. The structure underneath is what determines whether it helps you scale or quietly strains your cash.
When you're comparing providers like Clearco, Wayflyer, or Shopify Capital, focus your diligence on the mechanics. Ask what the true total cost is after every fee. Ask whether they underwrite all your sales channels or only one. Ask how remittance behaves in slow months and in fast months. Ask how wholesale revenue is counted and when it's recognized. Ask where funds go and how much control you keep.
Also ask what support looks like after the deal closes. Will you keep the same person, or will you get passed around? In volatile businesses, continuity matters. You shouldn't have to re-explain your cash cycle every time you need help.
This is what I mean by alignment - not just access.
What "good structure" looks like (using Paperstack as an example)
At Paperstack, we're a direct lender. We're not a broker. We built our Capital Wallet because we didn't like the one-off advance model that forces brands into constant refinancing.
Our facilities are usually larger commitments, often in the $1M to $3M range, with tranche-based draws. Brands typically draw $100K to $500K every 45 to 60 days, based on what the business needs. Each tranche has its own payback period, usually 3 to 9 months, and the facility can extend as you keep drawing.
We charge a flat fixed fee on deployed capital. We don't charge origination or processing fees, and there are no fees on the unused portion of the line. Repayments are tied to a percentage of revenue, and we use monthly repayment caps to avoid the penalty of success when a brand has a huge month.
I'm sharing this because CFOs deserve to see what a structure looks like when it's built around cash flow timing. Whether you work with us or not, use this lens. Capital should start working with your business, not against it.
Closing: Turn working capital into an operating system
Paperstack originally started as a CFO analytics platform. We built tools to help brands see their financial data in real time. Then founders told us, very directly, that visibility wasn't enough.
They needed capital to act on what they were seeing.
That's still how I think about the job in front of you. Data alone doesn't move a business forward. Capital does, when it's deployed with insight.
If you follow the steps in this plan, working capital gets simpler. You map timing with honesty. You align the team around one model. You protect availability instead of celebrating stockouts. You scenario-plan with discipline. You use the right capital for the right job. You draw it on a schedule that matches your supply chain.
Do that, and volatility stops being a constant threat. It becomes a variable you can manage.
That's how you build a durable capital foundation that grows in rhythm with your brand.
Frequently Asked Questions
Is marketing spend significant enough to disrupt working capital timing?
Yes. Marketing is a capital allocation decision, not just an expense. With companies allocating an average of 9.5% of total revenue to marketing, it is a top cash outflow alongside inventory. If ad spend pulls demand forward before inventory lands, you create a cash trap rather than sustainable growth.
Why do traditional banks often reject profitable asset-light brands?
Traditional underwriting is built for factories and equipment, not modern commerce. Banks often view seasonal revenue swings and high marketing spend as 'risks' rather than investment engines. Consequently, even brands with healthy margins and strong sell-through get declined because they lack physical collateral, despite having high 'cash flow quality.'
Is monthly cash flow forecasting sufficient for scaling e-commerce?
No, monthly reporting is too slow. In e-commerce, a lot can go wrong in two weeks. You need a weekly cadence to identify cash gaps while they are still manageable decisions, not crises. This allows you to spot inventory risks or adjust spend before you are forced to make drastic cuts.
Should we view inventory stockouts as a positive signal of demand?
No. 'Selling out' is arguably a financial or operational failure. Beyond lost sales, you break momentum and consumer trust. The invisible cost appears later in your Customer Acquisition Cost (CAC), as you pay extra to re-engage those customers. It is often smarter to intentionally slow sales velocity than to break the supply chain.
What is the most efficient structure for drawing down growth capital?
Avoid taking lump sums 'just in case,' as this acts like maxing out a credit card and strains daily cash. Instead, match capital draws to your supply chain rhythm: draw the deposit when required, and the balance upon shipping. This aligns your financing costs with operational events and keeps your forecast clean.
