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The Triple Power Play: How Financials, Budgeting, and Real-Time Analytics Drive Business Success

The Triple Power Play: How Financials, Budgeting, and Real-Time Analytics Drive Business Success

Last Updated:  
March 18, 2024

The Triple Power Play: How Financials, Budgeting, and Real-Time Analytics Drive Business Success

In this blog post, we’re diving into the exciting relationship between financials, budgeting, and real-time analytics, and how they play a vital role in driving business success.

The focus will be on how these three pieces form a cycle that helps businesses make informed decisions, plan for the future, and achieve their goals.

#1 Lock Down Accurate eCommerce Financial Data

Too often, ecommerce business owners see their financial reports as merely an input for tax filing. Instead of using the insights from good financials, they rely on bank balances and sales reports to steer their business. This blinds them to what’s actually happening with resources, cash flow, and profit realities.

Each financial report provides insights into an ecommerce business that cannot be extracted from other systems or statements. There are three main financial reports for a business owner to pay attention to:

  • Profit & Loss (Income) Statement
  • Balance Sheet
  • Cash Flow Statement

Profit & Loss (Income) Statement

A good Profit & Loss (P&L), or Income statement, is critical for ecommerce businesses for the following reasons:

  • Proper understanding of gross and net revenue
  • Getting an accurate cost of goods sold (COGS)
  • Understanding marketing efficiency
  • Tracking fulfillment costs
  • Tracking payroll costs
  • Tracking other expenses

Proper Understanding of Gross and Net Revenue

Shopify, Amazon, and other sales channels will often report gross revenues and fees that are pulled before payouts. Having this summarized in a P&L can make it easy to see the costs of revenue for the entire business.

Getting an Accurate Cost of Goods Sold

The biggest mistake an ecommerce business can make is to apply purchased inventory as COGS.

Understanding how to account for inventory purchases is the preface to properly understanding COGS. With accurate COGS, one can determine gross margins (net revenue minus COGS divided by revenue).

Low gross margins are the death of any product business. In general, 40% gross margins or greater should be the target, with 75% or greater the ideal.

Understanding Marketing Efficiency

Marketing spend makes or breaks many Direct-To-Consumer businesses. Most digital marketers know and focus on Return on Advertising Spend (ROAS) with ad campaigns.

Marketing Efficiency Ratio (MER) can be a better metric as it takes into account all revenue spending divided by all ad spend in a time period, giving a more holistic view.

MER of 3 or greater is considered good and MER of 5 or greater is considered great. MER is easily calculated from a P&L.

Tracking Fulfillment Costs

Shipping to customers can drag down profitability. Tracking fulfillment costs as a percentage of sales will allow one to maintain good margins.

Tracking Payroll costs

Payroll will likely be one of the top expenses, and it is worth measuring it as a percentage of revenue.

Tracking Other Expenses

Often any other expenses are much smaller for ecommerce businesses, but some can creep up. Software, rent, and other expenses can increase over time, and it is worth paying attention to them.

The P&L can inform various actions. For example:

  • Price adjustments based on COGS changes
  • Shipping strategy as fulfillment costs change as a percentage of sales. This could include: changing or using a 3PL, passing on shipping costs to customers, or carrier usage.
  • Marketing strategy

As a final thought, note that profits don’t equate to cash. Cash is often exchanged for inventory, which is found on the balance sheet.

The Balance Sheet

It is easy to focus on the P&L and overlook the balance sheet. The balance sheet tracks:

  • Assets, such as cash and inventory
  • Liabilities such as bills and loans
  • Owner equity

Let’s dive into key areas as they relate to product businesses.


There are two key assets for a product business: cash and inventory. Cash is exchanged for inventory, and when inventory is sold it is turned into cash, ideally for much more than what it cost.

Cash is king and is the fuel that drives every business. Cash cycles can be dictated by inventory purchases and the cycle of paying for inventory, then selling it.

Inventory levels aren’t usually found on the balance sheet (they should be in an inventory management system or IMS), but the value of inventory is found there. That value is important as it represents locked up cash and potential sales value.


Bills are often short in life but can accumulate without adequate cash needed to pay them.

For product companies, loans can be necessary to purchase inventory. The amount of debt is key to track as it can become a drag if cash isn’t there to service it. It can also be problematic when profits are being used heavily to service debt.

Cash Flow Statement

The cash flow statement tells the story of the movement of cash, starting with a net income or loss broken out by key cash inflows or outflows. Add in cash in or out from lending. The result is added (or subtracted) from the starting cash position for a period to come up with cash at the end of a period. This story helps you understand cash movement and what is required to stay liquid.

#2 Build a Budget for Your eCommerce Brand

A budget is a prediction of future profit and loss statements. It requires several kinds of forecasting to create a well-rounded budget:

  • Revenue forecasting
  • Marketing forecasting
  • COGS forecasting
  • Fulfillment forecasting
  • Other expenses forecasting
  • Profit forecasting
  • Cash flow forecasting

Revenue Forecasting

For many ecommerce sellers, revenue is a byproduct of marketing spend. Modeling this can be difficult, but by taking the time to project results based on marketing spend, you can determine whether a business is profitable or not.

ROAS projections can be a simple way to extrapolate sales, but it gets complicated quickly.

Predicting sales can be hard because ROAS and marketing impact can be hard to predict. A conservative approach would be to use a low ROAS forecast as a good way to ensure that you have profits after all other spending. This would be done by using the worst expected ROAS, then calculating sales from there.

The complexity with revenue forecasting comes with new sales vs. return sales and the complexity of attribution. New customers can be tricky to predict as they may come from a variety of sources. Return customer revenue ideally comes via email, postal marketing, SMS or other marketing tactics, but it can also come from digital ad spend.

The best way to forecast is to start forecasting, measure, and adjust. Reality never matches predictions, but it can get close.

Marketing Forecasting 

Marketing is probably the most difficult part of a product business to forecast because it typically drives the sales levels. Let’s explore what’s easier and what’s hard.

Easier: There are a lot of fixed or predictable costs that go into ads and other marketing. They included agencies and consultants, photography and creative, and other non-ad spend. Lots of this spending is input to ad spend, but it’s easy to spend a lot here and not get results.

Harder: It is easier to put down an ad spend level and harder to determine the impact. See above with sales forecasting as ad spend and revenue usually go hand in hand.

COGS Forecasting

COGS forecasting can be much easier as product costs should stay relatively consistent as a ratio to sales costs. Changes come from cost changes in inventory or over-discounting. Again, modeling against the past can be helpful when applying adjustments as projected.

Fulfillment Forecasting

Fulfillment usually is within a predictable ratio of revenue. As such, forecasting can be easy to do here.

Forecasting Other Expenses

Most every other expense is controllable and management. Putting together a list of expenses can take time, but it isn’t that hard. Things that are hard to predict can include price increases in software or labor but assume they will happen.

Profit Forecasting

Put all the above together and you should have profit forecasts. The formula is simple: revenue minus COGS minus expenses equals profits.

If your forecast shows losses, time to dive in and tweak the model or the business. Be aware that this is done using accrual accounting, profits do not equal cash which gets to the next topic: cash flow forecasting.

Cash Flow Forecasting

Cash flow forecasting becomes critical as a product business grows. A good cash flow forecast will tell one when there are cash gaps or surpluses. Building this forecast is more than using your P&L. Here are a few key reasons:

  • Payout timing
  • Inventory and the Cash Cycle
  • Expense Timing

Payout Timing

Everyone knows there is a delay from when a sale occurs, and the payout is received. Depending on the channel or payment processor, this can range from days to weeks. In the case of wholesale, this can be months.

The first part of cash flow forecasting is to use your budget and adjust for when cash is received from sales.

Inventory purchases are the killer of most businesses. One must predict when inventory purchases are needed, how much will be needed, and the timing of payments. A good IMS with proper inventory management will be extremely helpful in building an inventory forecast model.

The big challenge with inventory purchases is the cash conversion cycle. The cash conversion cycle for inventory purchases refers to the time it takes to convert cash into inventory and then back into cash through sales. There are lots of steps including ordering, manufacturing, shipping to warehouse, selling, and payouts before cash in becomes cash out.

Expense Timing

Expense timing comes in the form of when bills are due or when credit cards must be paid. Longer terms are better as it works against the cash conversion cycle in a business's favor.

Putting it Together

A cash flow forecast can be as simple as:

  • Starting with cash balances
  • Adding a budgeted net income
  • Adjusting for revenue timing
  • Incorporating inventory purchases
  • Adjusting for expense timing

Budgeting is often done for monthly periods, but you may need to roll up your sleeves and go weekly with a cash flow forecast if cash is very fluid and\or tight. Similar principles apply for weekly forecasting; it just takes more effort.

#3 Use Real-Time Analytics to Make Better Decisions

In contrast to traditional financial reporting, which often lags behind real-world developments, real-time analytics provide a constant stream of insights that illuminate your business's trajectory. With Triple Whale, you're not just reviewing historical data; you're witnessing your performance as it unfolds. This is particularly crucial for budget tracking, where real-time insights can mean the difference between capitalizing on opportunities or missing out due to delayed information.

A powerful application of real-time analytics lies in its role in marketing spend. The agility to make adjustments on the fly based on real-time performance metrics can be a game-changer. Triple Whale enables you to see the immediate impact of your marketing investments, ensuring that your spending aligns with your revenue goals. This agility doesn't just enhance the effectiveness of your marketing campaigns; it directly influences your bottom line.

Moreover, Triple Whale introduces a symbiotic relationship between budgeting and real-time insights. By seamlessly integrating budget models with real-time revenue and marketing spend data, the platform offers an evolving projection of profits throughout the month. This dynamic feature equips decision-makers with an unparalleled ability to adapt strategies on the go, capitalizing on emerging trends and swiftly mitigating challenges.

In essence, Triple Whale becomes the compass guiding your business in the right direction. With real-time insights at your fingertips, you're poised to make swift, calculated decisions that keep you not only competitive but also ahead of the curve. Through the fusion of budgeting acumen and the power of real-time analytics, Triple Whale propels businesses towards a future where agility and informed decision-making reign supreme.

Review, Adjust, and Repeat

Once a month is over and financials are completed, it’s time to review and adjust. See if plans met projections and real-time measurements. Adjust budgets and update models in Triple Whale for better real-time feedback. Continue this process to get better at managing your business.

Putting It All Together

To recap, there is a synergistic effect when these three things are used together:

  • Financials report reality and inform the future.
  • Budgets and cash flow forecasts predict what the future is expected to be.
  • Real-time analytics measure reality and shorten the process of understanding between today’s marketing spend and compiled financials.

Businesses can use Triple Whale to monitor performance, confirm their assumptions with financial reporting, and use those insights to refine their budgets, which are then fed back into Triple Whale.

Use this data-driven approach to drive better outcomes and better decisions.

© Triple Whale Inc.
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