Australian retailers have been feeling the squeeze of late. Though the past few years have been turbulent, most retailers have been kept afloat by locked-down consumers keen to spend their spare cash online and then by a surge in bricks-and-mortar spending as they dashed into shops with their government support cheques.
However, the start of 2022 has shown us that this year won’t be rosy. Supply chain issues, coupled with rising energy prices, pushed higher by the conflict in Ukraine, are making it more expensive for retailers to secure stock. As inflation rises, consumers are less likely to spend frivolously on basic groceries or consumer goods.
Thankfully, the Federal Budget included a number of measures to dampen inflation and a rising cost of living crisis, such as a cut in fuel duty. Money back in the pockets of consumers will help retailers and ecommerce businesses, but most should still be looking at ways to free up cash flow in their businesses. Many will be looking at cost centres, such as the Accounts Payable department, to see if they can create efficiencies. However, rather than reducing headcount, CFOs and finance leaders should challenge these teams to become revenue drivers.
Automation shouldn’t always lead to reduced headcount
In times of economic turbulence, retail and ecommerce firms will be having to continually onboard and offload new suppliers as they battle to source stock or raw materials. Most will be considering ways to automate this function, in order to better keep track of a multitude of customer payment terms.
AP automation technology is therefore essential, along with automated procure-to-pay, accounts payable and E-Invoicing technologies. These tools should really be considered table stakes for retail leaders that want to reduce the risk that manual processes will bog down their AP team and create costly mistakes.
But cutting the headcount of the AP team, following the shift to automation, could be an error. In fact, the AP team is the first point of contact for most suppliers, and so should be treated as an essential source of information and a key driver of positive supplier relationships.
Firstly, AP should be considered a retail leader’s ‘eyes on the ground’ for how suppliers are performing and behaving. If a supplier is demanding unreasonable payment terms, it may be because they are struggling to maintain their working capital. This is an essential piece of information that retail leaders need to know as losing a critical supplier because they have run out of cash does not help the smooth running of a company. Whether you’re a multinational or one-man ecommerce startup, not being able to fulful customer orders will mean those customers don’t come back.
Taking this view will then lead retail leaders to see that the AP team should be empowered to handle follow up conversations with suppliers, trusting them with the responsibility to negotiate early payment discounts that will benefit the business and its customers. Why not make the team closest to the suppliers the ones who are able to negotiate the best payment terms for the business? Setting the responsibility for this within the AP team alleviates business leaders from worrying if competitors are getting a better deal.
Finally, freeing up the AP team with automation technology will enable them to take on tasks from other members of the finance team. Future financial managers cutting their teeth in AP will be motivated by the chance to learn about different functions of the finance team and, managed correctly, cross-team collaboration could sprout innovation that leaders rarely have the headspace to generate themselves.
Empowering AP teams will lead to satisfied customers
Navigating 2022 is going to give retail leaders a headache and it’s not unreasonable that their first reaction is to look at reducing headcount in their business. However, great retailer-supplier relationships will be worth their weight in gold in a time when global supply chain issues and rising inflation show no sign of going anywhere soon. Securing the best payment terms and keeping suppliers happy will be essential steps to stay ahead of the competition, fulfill customer orders and keep them coming back.
Freeing up the AP team to own the supplier relationship will ensure that retailers have the closest-possible experts looking after the issues and spotting opportunities within the retail industry.
Paul Moreton is client executive and supplier enablement specialist at Proactis.