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How Retail Businesses Can Make Accounting Smooth? Experts’ Suggestions!
If you’re running a retail store, ensuring an accurate account of your existing inventory may be a challenge. Many retailers struggle to manage their retail accounting frequently. However, understanding the best way to account for your present and past inventory can be difficult if you can’t keep an exact count of the number of items in your store.
This is where retail accounting can provide an easy way to manage your current inventory without manually counting every item you have.
Let’s get into expert recommendations and suggestions on Retail Accounting
1. Stephanie Heredia, CEO at Taxes Tampa LLC
Here’s what I’d advise retail/e-commerce clients who are new/trying to get ahead of common accounting problems:
Researching if your product is taxable or not. This might sound simple, but it’s commonly overlooked as every state is very different regarding what it considers taxable. For example, medical equipment is usually tax-exempt, and even custom software can be tax-exempt! Most other tangible goods are subject to sales tax.
It’s highly recommended that you research your state’s sales tax rules and regulations to determine the taxability of your product first and foremost.
Research (if you’re a remote seller/sell online) the taxability of your item in other states and the rules/regulations regarding remote sales in other states. Sales tax nexus defines the level of connection between a taxing jurisdiction, such as a state, and an entity, such as your business. This connection must be established before the taxing jurisdiction can impose its sales taxes on you.
There are two ways to establish a nexus: revenue and volume. Ensuring you cover your compliance bases before jumping in will save you time and headaches later down the road!
Research the rules of Amazon if you sell there. Amazon is a whole other beast when it comes to sales tax. A common misconception is that Amazon handles ‘everything.’ Although, while they do collect and remit sales tax on your behalf, they will not
- Register you in the states you meet nexus rules in,
- Research anything that you fall out of compliance for or
- Respond to any Department of Revenue notices you may receive
So again, it’s essential to know the ins and outs of sales tax if you’re a retailer considering entering the Amazon Seller network.
Other non-sales tax-related accounting notes: A solid inventory system is key to staying organized as your SKUs and sales grow. Start with the end in mind.
Create a system that is scaling for when your business is 10x the size you are now because overhauling an inventory software, system, or process is a big undertaking that can be catatonic if done wrong. i.e.,
- Do you have a system for naming new SKUs?
- Do you have a system for tracking inventory in different places in real-time (i.e., inventory on hand vs inventory sitting at an Amazon FBA facility, etc.)?
- Do you have a system for tracking the cost of sales per SKU?
The document, document, document, and you will never regret it. It’s a working model, but you’ll need a solid foundation first and foremost.
2. Dan Langhofer, CEO of Paperwise
I can think of five ways automated workflows and process automation can significantly improve your accounting department’s efficiency.
- Automating repetitive tasks: Tasks such as data entry, invoicing, payroll, and reporting can be automated using various accounting software. This reduces the chances of human error and frees up time for your staff to focus on more strategic tasks.
- Streamlining approval processes: Automated workflows can facilitate faster approval of financial documents like expense reports, purchase orders, and invoices by sending them directly to the appropriate person for review and approval.
- Real-time financial tracking: Automated systems can provide real-time updates on your financial status, enabling quicker decision-making.
- Integration with other business systems: Many accounting software can integrate with CRM or inventory management systems, providing a more holistic view of the business.
- Automated reminders and alerts: Systems can be set up to send automatic reminders for due dates or notify of any discrepancies, ensuring nothing slips through the cracks.
3. Matthew Turner, Founder of Boston Turner Group
Accounting teams can run more smoothly when they share a common language for goal setting and performance. Companies often invest in training for technical and sales departments but need to pay more attention to the importance of growing the skills of their accounting teams. Coaching and training are essential in helping your accounting team operate.
Coaching around setting clear goals, OKRs, and managing through KPIs can help accounting teams in many ways, and business coaches can play a critical role in helping the accounting department establish clear, measurable goals and Key Performance Indicators (KPIs).
The first step is to identify what the department wants to achieve. Any method you use to set and track goals can work as long as you are consistent. These goals could range from reducing errors in financial reports speeding up the invoicing process, improving cash flow management, or increasing efficiency in tax preparation. A talented coach can guide this conversation, ensuring the goals align with the business objectives.
Once the broad goals are identified, the coach can help refine them into Objectives and Key Results (OKRs). For instance, instead of a vague goal like reducing errors, a refined OKR would reduce errors in financial reporting by 10% over the next quarter.
Other possible KPIs for an accounting department include Days Sales Outstanding (DSO), cost per invoice, budget variance, etc. A strategy coach can assist in identifying the most relevant KPIs and setting up a system to track them.
Finally, a coach is like an outside voice at your table. Everyone in the department must understand the goals, the KPIs, their role in achieving them, and the consequences of not meeting them.
4. Jeff Mains | Financial Expert and the CEO of Champion Leadership Group LLC
Before anything else, it’s crucial to establish transparent and well-defined financial processes. Retail businesses can reduce the possibility of inaccuracies and increase the reliability of their financial reports by adopting consistent practices for documenting transactions, managing inventories, and processing cash flow. Financial records must be accurate, so it’s important to perform regular audits and reconciliations.
Furthermore, retail establishments should implement competent accounting software tailored to their requirements. The company’s financial health can be better understood using reports generated by this program that track sales, inventories, and expenses precisely. Retail companies can save time and money by automating these operations, which also helps to reduce the likelihood of human error.
5. Martin Mulyadi, Ph.D. | Professor of Accounting
Retail businesses face unique accounting challenges, among them inventory management and the effects of seasonality.
Firstly, inventory management is important, but it’s also complicated. It is more than just recording the purchase of inventory. Factors such as inventory shrinkage due to loss or damage and recording the cost of goods sold are essential. To this end, I recommend implementing an automated inventory management system that integrates with accounting software.
Regular physical stock checks are also equally important to identify discrepancies early. Immediate reconciliation of physical counts with inventory records is essential in identifying discrepancies.
Secondly, seasonality is a typical phenomenon in retail businesses, affecting not just inventory but also cash flow management and staffing. In this case, I recommend applying predictive analytics to reduce the impact of seasonality. Effective predictive analytics enables businesses to anticipate product demand at different times of the year, project cash flows, and even determine the most profitable pricing strategies for different times of the year.
Overcoming inventory management challenges and seasonality goes beyond just keeping the books balanced. It’s about turning potential liabilities into assets.
6. Solomon | CEO at Infotechwealth
Integrate Point of Sale (POS) System with Accounting Software: To streamline your accounting, consider integrating your retail store’s Point of Sale (POS) system with your accounting software. This integration allows for automatic and accurate sales, expenses, and inventory data recording, reducing manual data entry and potential errors.
Track Inventory in Real-Time: Maintaining real-time visibility of your inventory is crucial for accurate accounting. Adopt inventory management software that automatically updates stock levels with each sale and restock, providing you with accurate cost of goods sold (COGS) figures and preventing discrepancies.
Automate Reconciliation: Utilize accounting software that offers automated bank reconciliation. This feature matches your bank transactions with your recorded transactions, making it easier to identify discrepancies and maintain accurate financial records.
Categorize Expenses Appropriately: Ensure your expenses are properly categorized to understand your business’s financial health clearly. Create specific expense categories for your retail operations to analyze spending patterns and identify cost-saving opportunities.
Implement Regular Financial Reviews: Schedule regular financial reviews to assess your retail business’s performance. Analyze sales trends, profit margins, and expenses to make informed decisions and identify improvement areas.
Train Your Accounting Team: If you have an accounting team or personnel handling your finances, invest in their training. Make sure they are proficient in the accounting software you use and stay current with best practices in retail accounting.
Keeping track of cash inflow and outflow, petty cash expenses, and balance sheets requires you to be meticulous. That’s why opting for retail accounting services by Cogneesol can be an ideal solution. We are your dedicated accounting experts with 15+ years of outsourcing experience, delivering accurate and round-the-clock support. For more details, get in touch with us at [email protected] / +1 833 313 3143
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