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COVID-19 will push Australian retailers into the modern accounting age

In 2020, times have never been tougher and local merchants may need to streamline their finance and accounting processes if they’re to stay in business

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British retailing supremo Sir Philip Green once observed that ‘people are always going to go shopping’. Optimistic words – but many local retailers could be excused for thinking they don’t apply during pandemic times.

The coronavirus crisis has decimated the Australian retail sector; already in the doldrums after years of flat wages growth and an ever-increasing leakage of customers to online only competitors offering keen prices and lightning fast deliveries.

Big brands biting the dust

In recent weeks alone, we’ve seen the demise of high-profile brands including the swimwear labels Seafolly and Tigerlily and camping supplies chain Aussie Disposals. It’s likely more retailers will follow these companies down the road to the administrators, as recessionary conditions continue to quash spending, in the 2021 financial year and beyond.

Other retail businesses are finding online sales, once a niche aspect of their operations, have become the lifeline that’s keeping them afloat, as COVID-wary customers eschew malls and shopping strips in favour of browsing safely via their smartphones.

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NAB’s Online Retail Sales Index, Monthly Update – May 2020 showed Australians spent $34.18 billion on online retail over the previous 12 months. That’s just over 10 per cent of the total retail trade estimate and an increase of almost 19 per cent on the previous year’s figures.

But digital sales channels are not without costs and complexities. They can call for new billing systems and payment types, such as PayPal and GooglePay, cloud solutions to expedite the purchase and dispatch of goods and services, and digital marketing programs to push those offerings to consumers, via smart devices and social media.

Retailers that are still relying on old school tools like spreadsheets are likely to find the complexities of this new age business model a stretch. Doubly so if COVID disrupted their operations and prompted an unplanned shift to remote working, for some or all of their team, during the April and May shutdown periods.

The continuous accounting advantage

Overhauling the accounting and finance lifecycle can give a retailer up-to-date data on their position, at any point in time. That’s invaluable insight, especially when conditions are uncertain, and financial planning and decision making is a fraught and complex process. Tales of retailers that have been sunk by cash flow crunches are legion. Very often, it’s a position that’s arrived at when business leaders have insufficient access to data on how the business is travelling financially, in the here and now.

An accounting methodology which allows workloads to be spread evenly across the accounting period, rather than concentrated at the end of the month or quarter, continuous accounting is based on three principles – automating repetitive processes, eliminating end-of-period bottlenecks and implementing a culture of continuous improvement.

For retailers, the specific advantages of accounting automation include continuous daily reconciliations which generate a comprehensive view of operations – from orders placed to suppliers, to cash received from customers – and automated transaction matching.

The former provides leaders with the data they need to make agile, proactive business decisions while the latter has the potential to free up significant resources on the administration front, which can be redirected to value adding activities.

Preparing your retail business for a stronger post-pandemic future

There’s no question the next couple of years will be very difficult ones for Australia’s beleaguered retail sector. With consumers drawing in the collective purse strings, businesses will need to work harder to attract and retain their custom and find ways to make their business models leaner and smarter. Implementing systems which enable them to keep their finger firmly on the financial pulse is likely to be an imperative, for retailers determined to survive and thrive in the face of significant adversity.

Claudia Pirko is regional vice president for ANZ at BlackLine