The key to financial management is timeliness
Tracking retail financial data enables owners and managers to make decisions and control the performance of the business.
Retailers have a myriad of data that can be collected and analysed.
But, according to Pitcher Partners’ Norman Thurecht, it is however useless unless the data can be assembled into easy to read reports in a timely manner.
The fundamentals of financial reporting are the profit and loss, balance sheet and funds flow (where the money went) report.
They are inter-connected and one does not work without the other.
The benefit of the funds flow statement cannot be underestimated.
If you are not already doing this on a monthly basis I must ask how do you budget for stock purchases, sales peaks and increased customer visits?
Getting quality data into the accounting system to provide quick easy to read reports is paramount.
To achieve this you need to automate such things at the importation of point of sale data (daily sales, customer and items numbers) and reconciliation of the monthly supplier statements.
Once the source information is in the accounting system, you need to make sure the closing stock values and amounts owed by customers. Without these amounts, the profit result will be meaningless.
The reports should be tailored and understandable.
The data to put the Key Performance Indicators (KPIs) together must include financial information (from the profit and loss) but must also include quantitative data such as size of retail trading space, trading hours and number of full time equivalent staff to name a few.
The KPI report must be automated, accurate and be available in a very short time after the end of a reporting period.
The competitive landscape in which we all operate commands that we must be aware of the results, what influences them and what to change almost instantly to avoid cashflow problems which can occur in a short period of time.
It is imperative that you start recording and documenting the information so that you can report on it, manage it and tinker with the business model if necessary.
Sophisticated retailers are reviewing this information constantly within their own organisations. However, without looking at their competitors the results are meaningless.
Reducing costs is not always the answer to growing or sustaining profitability. It is the easiest lever to pull but often it can be the start of a deadly spiral.
Understanding what other levers you have available to pull and manage the business will be discussed and work-shopped in the upcoming Pitcher Partners breakfast seminar, Business Performance Improvement Fundamentals, at the CCIQ Boardroom in Brisbane on April 21.