Understanding Financial Challenges in eCommerce: A Comprehensive Guide

October 5, 2023


There’s no doubting the tremendous expansion of eCommerce sales over the last few years – and it’s only expected to grow. Forbes found that eCommerce sales will grow by a staggering 10.4% in 2023. This is great news for businesses and entrepreneurs looking to make the switch to selling online or get their first online store up and running. 

However, eCommerce also comes with its financial challenges. They range from fraud and security issues, to mismanaging inventories and tax non-compliance. Not being aware of these challenges leaves your business vulnerable to financial, reputational, and even legal repercussions. Here, we’ll break down the most common eCommerce problems businesses face – and how to address them. 

Navigating Cash Flow Management

Proper cash flow management is essential in ensuring your organization has enough money to cover expenses like debt, vendor payments, and the purchase of new assets. Cash flow management involves monitoring cash inflows and outflows to help your business remain financially stable and maximize every dollar.

Common challenges in cash flow management include delayed customer and vendor payments, excessive spending on operating costs, seasonal fluctuations, and inefficient payment processing. To avoid these problems, you can implement the following inflow and outflow management strategies.

Managing Inflows

To make inflow more predictable, send invoices as quickly as possible so customers don’t delay in making their payments. Additionally, it’s helpful to customers if your business can offer a variety of payment options, including card payments, direct debit, or even online payment systems. Lastly, follow up on overdue payments when they arise to avoid further delays by monitoring accounts receivable aging reports and identifying potential problems before too much time passes. Sending a helpful reminder early on can keep your bills top of mind and prevent unnecessary AP aging challenges. 

Managing Outflows

See where your business can save on discretionary spending. For instance, look into lower-cost supplies and consider bulk-buying deals. You can also negotiate with pay suppliers to pay installments versus lump sums or consider leasing over buying. It’s also helpful to lean on bill pay solutions to spend less time coordinating payments and properly categorize expenses as they occur within the business. 

Understanding Tax Compliance in eCommerce

Tax compliance is one of the most important considerations in eCommerce but also one of the most challenging to grasp. Thanks to countless jurisdictions and tax laws, tax laws are ever-changing nationally and internationally. Keeping up with these changes is time-consuming and can take away your focus from your big-picture business goals. That’s why working with a tax or accounting tax consultant is always advised, ensuring you adhere to the latest guidelines. 

Whether working on your own or with a partner, consider these common tax compliance challenges:

  • Sales/VAT Taxes: Sales taxes are imposed by governmental bodies on the sale of goods and services. VAT taxes are consumption taxes levied on the value of these goods and services at each stage of the supply chain. 
  • Nexus Determination: Nexus determination is the process of identifying whether a business has a strong presence in a jurisdiction to warrant taxation. 
  • Cross-Border Taxation: These are the fees charged by financial institutions for processing transactions that include cross-border sales. 
  • Filing and Reporting: You may be required to file tax returns with several tax authorities. You’ll have to keep tax deadlines, filing requirements and documentation in mind. 
  • Customer Location Accuracy: Some customers may report inaccurate or incomplete location information. It’s important to identify the right location to get the correct tax rates. 

To ensure you’re remaining compliant, perform research on sales tax rules for where you’re selling. This includes classification, duties, and tariffs. Be sure to understand tax deadlines and penalties for missing them. Lastly, track every penny and monitor spending along the way to stay compliant when it comes time to file taxes for the business. 

Managing Inventory Costs

Managing inventory for your eCommerce store ensures you maintain sufficient stock to meet customer demand while avoiding excess inventory, which affects your capital. With effective inventory management, you’ll benefit from increased profitability, smoother operations, and stronger customer satisfaction by continuing to stock in-demand items. In contrast, ineffective inventory management can lead to lost sales, out-of-stock products, and higher storage costs. Inventory management is crucial to keep spending in check within an eCommerce environment. 

Steps to properly manage your inventory include:

  • Accurate Inventory Tracking: Be sure to track inventory properly by monitoring stock levels, product variations, and incoming/outgoing inventory. 
  • Demand forecasting: Take the time to research and analyze historical sales data, current market trends, seasonality, and marketing patterns. 
  • Develop Supplier Relationships: With reliable supplier relationships, you increase the probability of timely deliveries and even product discounts. Additionally, a stronger relationship with suppliers can help a business realize savings that are not available to one-time buyers. 
  • Undergo Quality Control: Look into the reasons for product returns – are there any specific patterns, such as product defects? If so, address them to avoid future returns and improve customer satisfaction. 
  • Set Safety Restock Levels: Take a proactive approach by determining the best times for reordering products before running out of stock. Automating purchase orders based on current inventory levels helps take the guesswork out of the process and ensures there is always enough inventory to meet the needs of customers. 

Navigating Global Payments

Global eCommerce sales open your business up to more sales opportunities, but it also leaves room for more potential issues. By offering global payments, you’ll have to consider multiple currencies, exchange rates, and cross-border fees. To streamline the global payment process, undergo the following:

  • Payment Gateway Integration: Implement a payment gateway that supports international transactions and offers multi-currency support, secure payment processing and fraud prevention. 
  • Offer Multi-Currency Pricing: Consider offering pricing in multiple currencies to make the shopping experience easier and more convenient for shoppers. Even better, you can use real-time currency conversion rates for up-to-date pricing. 
  • Localize Payment Methods: Give customers a variety of payment options that are familiar to their country. You can research popular online payment systems in the area, such as PayPal and WeChat Pay. 
  • Evaluate Cross-Border Fees: Take the time to research cross-border fees to avoid unexpected fees and costs that come with cross-border transactions. There are fees associated with payment processors, currency conversions, and fees charged by financial institutions. 
  • Monitor and Analyze: Lastly, be sure to monitor payment performance, conversion rates, and payment trends across different markets. This will help you analyze transaction data and optimize payment performance. 

Dealing with Fraud and Security Issues

Unfortunately, fraud and security issues are commonplace in eCommerce sales. Fraudulent transactions and security breaches lead to financial damages, legal penalties, and a hit to your company’s reputation. Implementing suitable cybersecurity measures for your organization gives you a proactive approach that can reduce the likelihood of a security threat and limit damage if one occurs. 

Some of the most common cyber threats include:

Card-Not-Present Fraud (CNP) Fraud: These fraudulent transactions occur when a physical credit or debit card is not used during a purchase. Instead, fraudsters will use stolen information from a card to make unauthorized purchases. 

Account Takeover (ATO): Here, hackers take ownership of a user’s account using stolen usernames or passwords. From there, they can conduct fraudulent transactions, change shipping addresses, or even sell sensitive data on the dark web. 

Refund Fraud: During refund frauds, cybercriminals exploit a business’s refund policies to get a hold of illegitimate refunds or product replacements. They do so by submitting false claims, using fake or duplicate receipts, or returning stolen goods. 

Friendly Fraud: Also known as chargeback fraud, this is when a customer makes a purchase and then disputes the charge with their bank without a legitimate reason. As a result, they can obtain a refund or avoid having to pay for the product. 

Triangulation Fraud: Triangulation frauds are a little more intricate than other types of eCommerce frauds. Here, a criminal will create a fake storefront site that often appears to be legitimate and offers highly discounted prices on products. A customer will make a purchase, and the fraudster will then buy the item from a legitimate seller using stolen payment information. He or she then sends out the product and pockets the difference. 

So, how can you create a stronger defense for your business? Start by implementing fraud detection systems and strong access controls for your customers, like multi-factor authentication (MFA) for logging in to your online store. In addition, monitor transactions and use anomaly detection for identifying suspicious activity, such as unusual transaction patterns. 

Lastly, make sure your software, plugins, and website themes are up-to-date with the latest security patches and updates. By not updating, you leave your website more vulnerable to the newest cyber threats hatched by cybercriminals. You can take your cybersecurity a step further by performing regular security audits with penetration testing and vulnerability scanning to see if there are any weaknesses that can be quickly addressed and rectified.


Yes, the eCommerce landscape comes with its challenges. There are complicated payment processes, tax laws, and a slew of cybersecurity risks. Addressing these challenges includes a combination of strategic financial planning, researching payment processing and tax laws, and leveraging outside tools, technologies, and outside partners to streamline the process. By doing so, your business can maintain profitability and continue to achieve growth. 

To get external support for better visibility into the cash flow management of your business as well as the best ways to keep inventory information up-to-date, work with a company like Decimal. By outsourcing the repetitive bookkeeping tasks and implementing the best software solutions for eCommerce businesses, you can focus on growing your online store without having to waste time researching and building the ideal bookkeeping processes for your business. 

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*The information in this article is for informational purposes only and should not be construed as legal, financial, or professional advice. Settle makes no representation or warranties, expressed or implied, and in no event shall Settle or its affiliates, agents, or employees be liable to you or anyone else for any decision made or action taken in reliance on the information contained herein.