How Retail SMEs Can Transform Their Finance Department After a Pandemic
by James P. Outreach & PR ExecutiveFinancial adversity is at the forefront of many retail SME
leaders’ agenda. With 22
per cent of retail SMEs believing that it will take them up to two years to
recover from the financial constraints of the pandemic, it’s never been more
important to review your finance departments. It is vital that they maintain their
effectiveness to grow your business.
Finance departments have a role to play within every
department of your business. They can forecast financial growth or difficulties
and assist managers in navigating the most effective business strategies. This
being said, in one survey, 40
per cent of all SMEs still had no planning, management reporting, or
financial staff. Here, we look at the purpose of finance departments in retail
SMEs and how they can be transformed to help your business succeed.
Phasing transitions
Financial transformations must be approached with care. Identify
which aspects of your department need to be updated and which are the most
beneficial to your business. Aspects to consider reviewing include your finance
department's liquidity and its reporting processes. These can quickly
demonstrate their effectiveness to your business while contributing towards
financial refashioning.
The traditional finance department is reactive, producing
results for past business success and improvement. A transformed finance department
should be proactive, identifying how to move the business forward for a new
value.
For example, reviewing
liquidity ratios in the retail sector is essential to understanding cashflow. Finance
departments can continually review this to reveal trends over certain periods.
This can show how quickly the business can recover from financial adversity.
Recovering from the pandemic, it’s important to cover your
main bases before moving towards financial growth. Insurance is key when
evaluating how to financially secure your business. You must review your
current situation before initiating a financial transformation.
Companies may
also want to take guidance from those parties that understand your business
best such as your statutory auditor. A statutory audit
can deliver you with an independent opinion to shareholders on the reality and
fairness of your business’ financial statements.
The centre of strategic decisions
The finance department should be integral to strategic
decisions made by business management. This is particularly true in terms of
which projects or markets to pursue.
The efficiency of financially-driven business decisions is
also beneficial. Research indicates that companies that use effective strategy
methods obtain a 20 per cent
increase in revenue. Ultimately, finance departments allow business leaders to
make informed decisions. Guided by a standard set of practices, finance
departments present consistency in an often-fluctuating sector. This allowes
for financial and departmental comparisons, with quarterly reviews against
competitors.
To this extent, while finance can provide insight into the
effectiveness of your business, it must be utilised to continually improve
results. Finance departments should review income and outcome to prepare for
evolving business strategies and present a way to navigate through financial
difficulties. Finance must work alongside every department to calculate how
they can work to maximise profitability.
This is essential for retail SMEs. For example, in fashion
retail, trends and expectations can often dictate what clothing should be
produced and sold. However, finance departments can indicate which products
perform well year-on-year and hold consistent popularity with customers.
Neither takes away from the other, as both predictions are essential for this
industry. Instead, they work in unison to achieve popularity and assured profitability.
Evaluate and speculate
Finance departments can focus on evaluating the successes of
business to create a trajectory for business performance in the future. But
retail finance departments should look further. While reflecting on the
performance of the business, financiers in retail businesses should also make
predictions on future costs for the business. These can include, rent, material
cost, and the potential increase of tax. While finance is largely based in
mathematics, it’s not always an exact science.
These predictions are becoming increasingly important for
the retail sector. With trade negotiations subject to continual Brexit
developments, the finance department will be a lifeline continuing your
business into the future.
A series of CVAs
has seen retailers ask landlords to reduce rent on outlets to dispel lost
confidence in the high street. Finance departments must prepare for adverse
financial situations, even on the road to recovery.
Forecasting with data analysis may show a difficult road
ahead. But being prepared allows businesses to prosper in the future.
Speculation allows businesses to understand every potential scenario and how
they can be overcome efficiently.
Finance is an essential part of retail SMEs, particularly in
an adverse territory where businesses are unsure if survival is guaranteed.
While consumer confidence is slowly returning to the high street after a
tumultuous year, internal business confidence is key to your success. Internal
confidence begins with your finances and strategizing how they can be prepared
for future adversity or prosperity.
Sources
https://smallbusiness.chron.com/financial-ratios-important-retail-industry-23307.html
https://online.hbs.edu/blog/post/financial-decision-making
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Created on Feb 23rd 2021 03:26. Viewed 267 times.