The retail sector undergoes phenomenal changes and new challenges in the industry. Numerous retail companies have gone bankrupt, and several are struggling to prevent failure. Despite all the challenges, many retailers have been able to survive.
Though technology and accounting software has made some accounting functions easier to carry out, retailers still need to wear multiple hats. Accounting, being a vital part of any business, helps owners to identify their financial growth by translating numbers into comprehensive statements showing business profitability.
Business accounting typically involves recording, organizing, and analyzing financial transactions, which can be difficult to do due to everyday challenges that business owners must tackle.
By recognizing the growing accounting roadblocks, many retailers have moved toward outsourcing retail accounting services. Outsourced retail accounting services can easily streamline all the retail accounting operations and allow owners to stay focused on core business aspects.
Here are the common accounting challenges retailers must tackle -
1. Calculating Inventory Cost
Since you need to know the stock quantity available in the warehouse, and how much you need to order, to meet the customer demand and plan a budget accordingly, evaluation of expenditure on inventory is vital. For this, you must track how much you are spending to gather stock on a monthly basis and assume how much you might need to spend in the future. This will not track the movement of the items sold but the inventory costs, helping you determine profits.
According to one research - Misjudged inventory decisions—including overbuying, buying the wrong type of products, and misallocating inventory—account for an estimated 53% of unplanned markdown costs for retailers.
2. Changing Customer Expectation and Maintaining Loyalty
In the retail sector, customer preferences change, sometimes even faster than you can imagine. You should be able to catch up with customers’ shopping behaviors and trends.
Common mistake retailers often make is that they let their existing customers go assuming they can replace them with the new ones easily. With such a mindset, it will become difficult for you to achieve long term business growth. To attain and maintain customer loyalty, a personal approach in customer service is essential.
Common mistake retailers often make is that they let their existing customers go assuming they can replace them with the new ones easily. With such a mindset, it will become difficult for you to achieve long term business growth. To attain and maintain customer loyalty, a personal approach in customer service is essential.
A CRM system can efficiently help you manage your customers’ details and send personalized messages more easily.
3. Managing Cash Flow
For most retailers, cash flow becomes irregular due to seasonal demand. It is usually difficult for retailers to get detailed insights into their financials, which, in result, brings inefficiencies in their cash flow management process.
Smart retailers prefer to keep their data in more than one location, such as on cloud, to have a backup, but it is also a costly option. Thus, many retailers look forward to partner with retail business accounting outsourcing companies to forecast sales and revenues on time, which allows them to maintain sufficient cash flows.
Smart retailers prefer to keep their data in more than one location, such as on cloud, to have a backup, but it is also a costly option. Thus, many retailers look forward to partner with retail business accounting outsourcing companies to forecast sales and revenues on time, which allows them to maintain sufficient cash flows.
4. Losses Due To Crime
Shoplifting and theft are increasingly making the retail accounting process more complicated. As per one recent survey by National Retail Security, employee theft accounts for 45%, and shoplifting accounts for 35% losses.
Retailers operate on low margins, and this can be extremely detrimental for their business. As a result, retailers are keen to adapt retail store bookkeeping solutions. Accounting for Retailers is difficult; hence, accounting and bookkeeping software can help them automate their routine transactional processes and thereby reduce losses incurred due to human error.
5. Data Security and Information Management
With the advent of security breaches, it has become effortless for hackers to steal sensitive information from the retailers that expose their customers to risks like credit card frauds, identity thefts, etc. Retail accounting solutions offered by experts enables retailers to upgrade technology and help them mitigate the risks.
According to one survey conducted by SafeNet and Vanson Bourne, 25% of respondents find it hard to trust their own company for managing their confidential personal information.
According to one survey conducted by SafeNet and Vanson Bourne, 25% of respondents find it hard to trust their own company for managing their confidential personal information.
After considering the challenges, now retailers across the globe are planning to partner with established and reputed retail accounting service providers to overcome some or all the challenges they usually come across. An incredibly important task for retail businesses is selecting the right retail accounting experts.
Here is a video describing ways to enhance your retail and wholesale business
These days, hiring an in-house accountant can be costly; hiring an external accounting firm can help overcome multiple problems. Outsourcing your finance and accounting services can be a viable, affordable way to deal with the issues discusses faster, and get back back to focusing on what you do best.
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