It won’t come as a surprise that retailers are heading into a difficult time. Inflation has reached a 40-year high and is forecasted to rise even higher. As a result, consumers are struggling to afford basic goods. While much of the headlines are focused on how the crisis is affecting their spending habits, we are hearing less about its effects on retailers. As the costs of goods, energy, transport and staff rise, some retailers are struggling to stay profitable. John Lewis recently revealing its first half loss of £92m is a good example of the slowdown in consumer spending.
Sales growth across the retail sector is now at its slowest since COVID-19 lockdowns ended – showing that consumers are cutting their budgets amid looming spikes to household energy bills. In order to succeed in today’s environment and stay profitable, businesses need to employ the right tools that help cut costs, manage spend tightly and automate the finance function to be more productive and agile – whatever the situation.
The importance for retailers getting their financial house in order
According to a recent Soldo survey that looked into the spending habits of retailers and other high street businesses, petty cash is king. Half of those surveyed said they use cash to make purchases on behalf of the business which can make it difficult to know how much has been spent on what. The data also revealed that over 20% of professionals across the retail market were making purchases on a weekly or daily basis, and almost a quarter (24.2%) of respondents have a monthly budget of nearly £10,000.
We know that managing your business spend is daunting. But without being able to keep track of that steady stream of outgoings, your costs can quickly get out of control. Companies that lose track of their spending are unable to work efficiently and lack the oversight and data needed to make better decisions for the future.
The pain of manual processes
One of the scarcest resources in any company is time – and in the current climate, the price of misused time is high. Despite that, our research shockingly revealed almost a quarter of retailers (24%) are spending at least half a day a month processing their expenses.
While unwieldy manual processes may be a familiar way to get the job done, they are not ideal. What’s more, manually dealing with invoices is slow, and makes it harder to find and correct mistakes. Not to mention they may result in incomplete or errors from manual data entry . And when data can’t be relied upon, it’s difficult to make accurate spend assessments or forecasts.
Burdening employees with lengthy and complicated manual work is no longer acceptable when there’s technology to help support them. In addition to this, 30.2% of those in retail are getting reimbursed regularly. But with prepaid business cards, employees never have to spend their own money, fill in forms and wait weeks for a reimbursement, or carry around a wallet stuffed with paper receipts.
Traditionally, business spending has been managed via manual or legacy processes that are slow and labour intensive. It can take days to pull together an accurate picture of expenditure across your business. In order to have a sharper image of your business and to be able to make future predictions more reliable, you need a real-time view, and that means you need to cross the spend management gap.
Using technology and automation to make better decisions for the future
Technology is already being used by retailers in a variety of different ways to make shopping more convenient for shoppers. Now it is time to give staff the same level of convenience and streamline back of house operation. Retailers can use technology to their advantage by automating the spend management process. With technology like a spend management platform, teams can be freed from tedious data entry, paper forms, or number crunching. That means no more productivity bottlenecks at the end of the month. And when spending is easy to see, it’s much simpler to identify hidden costs. So, retailers don’t need to worry about overspending, duplicate subscriptions or invoices, or the 8% of unclaimed VAT that is left on the table after processing issues. Instead, they can concentrate on the work that matters – giving customers consistently good experiences in-store and online.
Everything is done in real-time, so retailers can access a complete picture of spending and cash flow at any time, without waiting for statements. And you can restrict what every individual can purchase and set limits, effectively creating a custom expense policy for every staff member.
In a recent GenCFO webinar titled ‘The cost of Living Crisis: controlling the uncontrollable’, Sandeep Dasgupta, Head of Finance, Marks & Spencer Food, stated that there is an opportunity for finance teams to help other areas of the business understand the choices ahead of us. For retailers to grow, your finance teams need to have visibility and control over exactly what’s being spent where and by who. It’s no secret that slim margins and slowing consumer spend are squeezing cost-of-living hit retailers. But by reining in and controlling spend, they can spend more time on the activities that add value to the business. For example, when they aren’t tied up with creating purchase orders or receiving invoices, they can find opportunities to achieve cost savings that improve their already slim margins.
Current events are negatively impacting consumers and retailers alike. In order to survive the current storm, retailers getting their financial house in order by putting a stop to spending waste and making sure they squeeze every drop of value from company spending is ever more key. By being clear with staff about what expenses are and aren’t allowable, setting limits, and using technology to keep everyone accountable, you can stop your company from leaking cash and make every penny go further.
