3 Steps Retailers Can Take To Reclaim Control of Non-Merchandise Spending
- 15 Oct 2020
- AP Automation
If you’re in the retail industry, you’ll most likely share a common frustration that comes with the unique requirements of accounting for retail. This frustration most often stems from internal business processes that can’t keep up with fast-moving consumer demands, competition, the procurement process, and seasonal peaks of retail shops.
For your business to be agile, you need to give budget-holders the freedom to make business partnerships (and that means purchasing decisions) without too much red tape. However, this freedom also brings the risk of uncontrolled spend and poor management of vendors, leading to high costs, unpaid invoices, inaccurate accounting, and a bad reputation. If you manage non-merchandise accounting with traditional manual workflows, chances are you suffer from common challenges in the accounts payable process, such as lack of control, financial blind spots, and inefficiencies.
There’s good news, though; retail companies around the world are using modern technology and key learnings from industry peers to reclaim control of their non-merch spend and ensure their retail stores stay competitive.
Retailers Can Digitize non-merch invoices (OCR, e-Invoicing and vendor portal)
Digitizing your non-merch invoices is crucial to get real-time accurate accruals and control of invoices. Lost and duplicated invoices are still a problem that afflict underperforming retail stores from an accounting perspective.
Note of caution: a data analysis of your vendor base with a competent partner will show the best options for invoice digitization. Do you outsource data capture to a BPO/Digital Mailroom? Should you push vendors to e-invoicing/EDI standards? Will onboarding vendors to a supplier portal work? Is OCR a pragmatic solution or a headache to avoid?
Avoid vendors and consultants who give you easy answers such as "Guaranteed 97% automatic capture" or oversell the challenges of onboarding vendors to a portal. The realities are subtle and depend very much on your unique vendor community and your leverage with them.
The results vary across the industry; some retail companies have utilized a vendor portal with tremendously positive results. Others struggle to show real ROI. And, yet, some still are able to negotiate EDI with all major suppliers and implement an extremely efficient operation as a result. Most retailers in the mid-market have positive results with a specialized OCR solution for invoices.
Retailers Can Automate the Invoice Workflow With e-Procurement and AP Automation in the Cloud
Once you have e-invoicing and automatic capture in place you are ready to automate the workflow itself within your organization. Modern accounts payable workflow systems reside in the cloud and can be accessed on mobile devices, and allow either a PO (purchase order) or non-PO approach to non-merch management. If you can get buy-in, an e-procurement solution can allow casual buyers to easily create requisitions from internal and punch-out catalogs and even enter goods receipt online. Alternatively, a strong business rules engine can automate non-PO invoice routing, default coding, and mobile approval.
Best-in-class retail stores are using specialized AP workflows (not customized general workflows and document management systems). The key factors for these companies are usability and solutions fit for the intended purpose, so you can deploy the technology easily and get users onboard quickly and without cumbersome training.
Retailers Can Measure KPIs in real-time and compare to relevant benchmarks
One of the biggest blind spots for most retailers is found in the accruals for non-merch spend. Sophisticated companies are employing e-invoicing and an AP workflow to get real-time accrual reporting with complete accuracy. Using this comprehensive indirect spend analysis allows them to measure their adherence to budget mid-month and ensure they drive their business decisions based on real-time financial data. During complicated global conditions, such as a pandemic or natural disaster, having a finger on the pulse of these updates is critical to remain profitable.And that is why tracking the KPIs of your accounts payable process is so crucial. If you want to get the benefits of early payment discounts or lower operational costs for accounting and management, you need to measure the right things and benchmark yourself against industry peers.