The cost-of-living crisis has triggered a spending slow down, for consumers and businesses alike. Shopping strips and malls aren’t as busy as once they were and many enterprises are looking to keep a lid on costs by deferring non-essential spending.

Indeed, the CommBank Household Spending Intentions Index found that spending growth declined to just 1.3 per cent in July and revealed Australians aren’t opening their wallets in the shops as freely as they did before rising interest rates and inflation entered the national economic equation. (1)

Just a few weeks earlier, CBA senior economist Belinda Allen noted that Consumer spending is generally weak, and we expect it will slow further given the RBA’s interest rate rises and with more on the horizon. We’re seeing signs of people cutting spending where they can, for instance more people using public transport to get to work to save on petrol and car park costs.” (2)

Finding economies

That’s bad news for retailers, particularly those whose offering is squarely targeted at the discretionary dollar.

With sales and margins under threat, finding ways to cut costs, boost efficiency and maximise cash flow is likely to be an imperative for many, in the upcoming 12 months and beyond.

Automating the finance function by implementing a cloud based, continuous accounting platform is a great way to achieve the first and second of those objectives.

The term ‘continuous accounting’ refers to a methodology for managing the accounting process by spreading workloads evenly across the accounting cycle, rather than seeing it concentrated at the end of the month or accounting period.

It centres around three core principles: automating repetitive processes; eliminating bottlenecks at period end; and creating a culture of continuous improvement.

A continuous accounting platform allows an enterprise to process transactions and update accounts in real time. In so doing, leaders are able to get an accurate, up-to-the-minute picture of how the organisation is tracking.

In addition to being able to access those valuable insights, businesses that go down this path can expect to reduce their manual processing time and finance department overheads.

For retailers feeling the pinch, those are genuine, ongoing savings that can make a significant difference to the bottom line.

Smarter credit decisions

Automating AR makes it possible for retailers to make more informed decisions about the individuals and organisations to whom they extend credit.   That’s critical in the current unstable economic environment for retailers managing risk with customer trade credit limits.

Because they’re able to enjoy up-to-the-minute visibility into customers’ payment status, their sales and finance leaders can see which account holders are regularly in arrears.

Armed with that intelligence, they can reduce or revoke credit for the persistently tardy – and increase it for customers who consistently pay on the nail.

It’s a smart way to reduce the risk of bad debts and the financial damage they can inflict on cash flow and profits.

Boosting cash flow

Automating accounts receivable (AR) activities, meanwhile, also enables retailers to speed up the flow of payments, by streamlining the debt collection and dunning processes.

At present, many businesses are still operating in cumbersome manual mode. Legacy processes and programs are being used to monitor invoices and payments and chase customers whose accounts are overdue.

Implementing an automated AR platform can result in instant efficiency gains. Retailers that do so can expect to reduce their manual processing and their AR overhead.  Perhaps most importantly, automation can reduce payment times.

For retailers running on tight margins, getting funds in the bank faster can ward off cash flow crunches and reduce reliance on finance facilities, at a time when borrowed money is becoming more expensive by the month.

Navigating challenging conditions

The economic pain is far from over for Australian consumers and the retail sector which relies on their business to stay afloat.

Businesses that wish to remain viable will need to find ways to reduce overheads and outgoings and shore up cash flow, in the face of what’s likely to be a very slow spending FY2024.

Automating the finance function is one way retailers can achieve these ends and those that don’t make it a priority may well find themselves counting the cost.

Rosie Cairnes is regional vice president of BlackLine’s Account Management Organisation for Asia Pacific.