Retailers are operating in a world which is vastly different from a few years ago. Faced with competition from across the globe, those organisations who fail to adapt and meet the new challenges will find themselves out of touch and out of business. With an ever increasing growth in the power of the consumer via internet and mobile purchasing applications, organisations need to be resourceful and innovative when tracking how trade is affected and adapt to suit. Nowhere is this more important than in Accounts Payable.
SAP for Retail
Some of today’s leading organisations are opting for specific accounting software such as SAP for Retail, which has the capacity to turn some of these challenges into opportunities. By providing results from measuring key metrics, an organisation is able to better understand what to do to ensure profit. Despite the obvious merits of this, owing to the relatively broad focus of some accounting applications, many find that it’s equally important to use additional highly targeted software to tighten up some of the financial processes.
Online Retailer Prevents Overpayments
For example, one leading online shopping channel discovered that it was spending far too long laboriously trailing through retrospective monthly and cumulative spreadsheets to identify any possible duplicates in had within the system. Due to the volume of transactions, this proved extremely time-consuming. Despite hiring a recovery audit firm to take some of the load, the organisation realised that they would not highlight the reasons for the errors, meaning that they’d probably make them again. Therefore, they decided to invest in a piece of bolt on technology designed specifically to pinpoint errors prior to the payment run, which resulted in a saving of £258,000 in actual costs – notwithstanding the man hours it would have taken to recover this amount had the errors not been discovered.
Technology Enables Accurate Reporting
Therefore, organisations with a keen eye to the potential of new technology (especially those whose metric tracking can provide additional benefits to the organisation as a whole), can place themselves at an advantage. This is particularly true in a sector notoriously plagued by a high staff turnover with all the associated cost implications. If you can make more accurate predictions on profit based on data originating in AP and the accounting systems, the more sound and reliable the organisation seems (resulting in better credit ratings), and the more AP becomes essential to core business functions.
Become More Efficient – Prevent Fraud
Surprisingly, even in some relatively well known and established retailers, simple procedures to prevent inefficiencies (and even fraud), are not being undertaken. For example, in a recent study into trading practices within the retail sector, it highlighted that terms were sometimes being agreed between buyers and their suppliers without knowledge of management. In large public limited companies, the results of such practices can be catastrophic, with profits being vastly overstated, with a resulting collapse in share price.
Police Your Master Supplier File
The biggest difference between retailers and other industries is the large volume of transactions and the pressures of seasonal fluctuations, combined with reporting regulations. In addition, depending on the sector, it’s an industry which can be dominated by supply chain issues (exacerbated by overseas sourcing) therefore it’s imperative to maintain an accurate and well policed master supplier file. Those who don’t, run the risk of exposure to fraud, duplicate payments and the negative effect to the organisations’ bottom line of poor time management and allocation.
Invest in Your AP Team
In a sector beset by a set of specific issues – price deflation versus rising costs (ie profit squeezing), complicated supply chain management, overseas sourcing (and accompanying Corporate Social Responsibility practice issues), it’s even more essential to baton down those areas which leave an organisation exposed. By taking a long, hard look at existing financial processes, making adjustments to become best-in-class and purchasing the appropriate technology – an organisation can reduce manual handling of data and provide a more efficient, cost-effective service – having tangible effect on bottom line figures. Retail is a fast paced, fast evolving and vulnerable environment – taking the time to invest in your AP team, provides the piece of stability organisations need to survive.