Retail Accounting

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Three ways to improve working capital through inventory efficiencies

Do you need to improve your working capital? Carrying out a detailed inventory review can generate surprising working capital benefits. Here’s how to do it…

Most FDs will be well aware of the improvements that can be made to working capital by refocusing their efforts around cash, debtors and creditors. However, a sustainable reduction in inventory can also unlock significant working capital – while delivering other associated business benefits, such as lower transport and warehouse costs, in the process.

The biggest benefits will be felt by businesses that overstock the wrong products and don’t always have the right products to meet customer demand; those that have a surplus of obsolete or marked-down stock on hand; those which experience stock-outs and back orders on popular products; those that stock a large number of products to meet the needs of few customers; or those that have a number of customers that place small or irregular orders.

For organisations where inventory is a significant contributor to working capital, a structured and detailed approach to reviewing inventory is vital to avoid compromising levels of customer service. Our approach comprises the following three key steps.

THREE STEPS TO IMPROVING YOUR INVENTORY EFFICIENCY

1. Inventory analysis at SKU level

An in-depth analysis of current raw material, work in progress and finished goods inventory at SKU (stock keeping unit) level is an essential first step to drive inventory efficiencies. This analysis helps businesses understand the value and level of inventory, as well as the coverage costs for each SKU against historical and future demand.

It is critical that this analysis is carried out at SKU level – not at the more aggregate category level. A category level analysis can be flawed as individual SKU under or overstocking issues can remain hidden among category averages.

2. Identifying key drivers for inefficiency

The inventory analysis at SKU level is the base reference from which to pinpoint the causes of inefficiencies and to start identifying solutions. To do this the key drivers for individual under or overstocking issues need to be identified:

• Key driver: Product proliferation

Product proliferation is a common factor behind large imbalances in inventory coverage. As such the inventory value and coverage for each SKU should be overlaid against its gross margin contribution. This provides the basis to justify product rationalisation.

Dealing with product proliferation issues:

  • Identify those SKUs that contribute the lowest gross margin contribution in value per annum.
  • Compare gross margin contribution against average inventory value, cover and cost.
  • Establish all SKUs and customers with a high inventory cover relative to demand and contribution.
  • Establish robust metrics and processes to deal with new product introduction, product promotions and de-listings.

The greater the number of SKUs, the more complex and costlier it is to sell, plan, track, manufacture, ship and deliver those units.

• Key driver: Customer proliferation

Having too many customers with unique products can result in excessive inventory costs, so it is important to evaluate the net impact of each customer on both the business and the inventory.

Dealing with customer proliferation issues:

  • Analyse customer sales history to understand the order frequency, the number and range of SKUs purchased and the average order size.
  • Identify those customers with the lowest gross margin contribution and highest conversion and distribution cost.

• Key driver: Internal planning systems and processes

Robust demand, supply and inventory planning processes are key. However, we often find that the planning function is underinvested and not aligned to the needs of the business. Often, a realignment of people skills, systems and processes to the business model is necessary.

More effective demand and inventory planning enables enhanced communication with suppliers. This aids the negotiation and implementation of consigned or vendor, managed inventory as part of the inventory reduction solution.

• Key driver: Sourcing model/supply chain

The sourcing model and supply chain have a significant impact on inventory, not all of them positive. For example, supply-chain efficiencies often drive companies to overseas suppliers with longer lead times.

Dealing with sourcing model/supplier issues:

  • Identify the inventory items that are overstocked because of supplier location, lead time, minimum order size or replenishment frequency.
  • For suppliers with long lead times, robust inventory planning will be needed, in particular for SKUs with low/high volatility or seasonal demand.
  • Align sourcing and inventory planning to reduce coverage costs.
  • Work with customers to provide accurate demand forecasts.

• Key driver: Production processes

Vertically integrated manufacturing companies face a major challenge in supply chain management: driving economies of scale in production while maximising inventory efficiency. For some businesses this may be straightforward. However, complications arise in cases of high product proliferation and low order volumes.

To balance these conflicting requirements:

  • Improve the planning process.
  • Improve the efficiency and responsiveness of production.
  • Differentiate service level by product and sales channel.
  • Determine target inventory levels as a result of the desired service level.

3. Pulling it all together

Once the SKU inventory analysis is complete and the key drivers for inefficiencies have been identified, finance directors and CFOs should prioritise solutions that will maximise inventory efficiencies and reduce working capital.

It is common for organisations to encounter significant push-back at this stage, eg, sales teams may not want to let go of products for fear of losing customers and sourcing professionals who have painstakingly built up an overseas sourcing model may feel threatened.

Therefore, independent advisers are often better placed to demonstrate the true impact that inventory inefficiencies have on the business, and to support management teams in the implementation of the necessary changes.

– See more at: http://www.grant-thornton.co.uk/en/Thinking/FD-Intelligence/Issues/Three-ways-to-improve-working-capital-through-inventory-efficiencies/#sthash.CGXiOjng.dpuf


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PRESS RELEASE: CounterBooks was shortlisted for the Association of Convenience Stores’ “Technology Showcase” event

CounterBooks, a leading Online Retail Accounting Management Suite for the fuel, convenience and general retail industry, is delighted to announce that they were shortlisted and presented at the Association of Convenience Stores’ “Technology Showcase” in Westminster, London.

The “Technology Showcase” was part of the Association of Convenience Stores’ ‘Heart of the Community Conference 2014’ which attracted convenience retailers, Members of Parliament and ministers from across the country who discussed various issues faced by the convenience industry.

Along with four other innovative technology suppliers, CounterBooks shared how it uses cutting edge technology to assist convenience retailers to reduce cost, improve performance and manage risk. The audience included members of the Association of Convenience Stores’ Independent Board and other highly experienced and knowledgeable convenience retailers.

The CounterBooks' Story

John Roberts, Managing Director, CounterBooks said ‘We were delighted to have been shortlisted for the “Technology Showcase”. The event was a great opportunity for convenience retailers and suppliers to discuss how to utilise technology. We really enjoyed contributing to the discussion.’

ACS Chief Executive James Lowman said: ‘Our Technology Showcase is a great opportunity for retailers and suppliers to share new ideas that are being developed for the convenience sector. We are delighted that CounterBooks was part of the event and able to share their innovations with those in attendance.’

To learn more about CounterBooks please visit www.CounterBooks.com

About CounterBooks

CounterBooks was developed in 2001 and launched on 1st January 2003 as the world’s first online full ledger accounting management suite designed specifically for retailers. It was originally developed by a frustrated computer-programmer-turned-retailer who struggled with traditional accounting systems which were not developed for retail businesses. His aim was to provide an easy to use system suitable for a retailer with no accountancy experience while still providing full easily understandable data reporting.

For further information about CounterBooks, including case studies, images or interviews, please contact, Laura Shafer – Marketing Assistant:-

Telephone: (+44) 0207 099 1050

Email: lshafer@counterbooks.com

Website: http://www.counterbooks.com


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Video: The CounterBooks Story

 

 

Beyond the 5 minute economy

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In 2014 Shell commissioned extensive research into consumer behaviour and expectations in four segments in convenience retail (fuel, convenience, technology and fashion).

The research examined the shopper behaviour of 6000 consumers across China, Germany, South Africa, Turkey, USA and the UK. 35 qualitative interviews with retail experts and business leaders were also undertaken.

The research uncovered a number of important findings:

1. The Gap: There is a significant gap between what consumers want and what they are receiving. Convenience retailers need to find a way to bridge this gap.

2. The Four Pillars – Efficient and high quality customer service, a variety of payment methods, a seamless omni-channel experience, and great partnerships delivering quality products.

These are the driving forces behind competition in convenience retail.

3. Time: In a fast paced world, time is in short supply. However, the amount of time consumers are prepared to spend in a store depends on the sector. For example in fuel retail, consumers are prepared to spend 1-5 minutes in the store, in contrast to technology stores where they will spend up to 26+ minutes.

Learning how to use this time effectively will be the key to convenience retailers’ success.

4. Convenience Cravers: This group (the millennials) represent 27% of consumers globally and are aged 25 – 34. They are driving change in convenience because:

  • They have larger than average disposable incomes
  • They are highly connected and influential
  • Act as brand advocates

Read the full report: http://www.shell.com/content/dam/shell-new/local/corporate/corporate/downloads/pdf/beyond-the-five-minute-economy-report-final.pdf

or

Watch a video overview of the findings:

 

 


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Whitepaper: Retail 2020

We found this great whitepaper from IBM and New York University Stern School of Business on retailing in 2020. In this whitepaper you will learn:Retail 2020 Whitepaper

– How the industry has been affected by the change in shopper behaviour.

– How retail has been shaped by events such as the recession.

– Who will shape the industry in the future and the implications for retailers today.

– Predictions on how retail will look in 2020.

 

To access the whitepaper visit:http://www-01.ibm.com/common/ssi/cgi-bin/ssialias?infotype=SA&subtype=WH&htmlfid=REW03013USEN

 

 


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Infographic: Innovating for Convenience

A great inforgraphic from Smart Action examining what customers want from their retail experience and how cloud technology can help retailers improve business performance.

Innovating for Convenience

http://www.smartaction.com/landing-page/retail-infographic

 

 


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PRESS RELEASE: CounterBooks Launches Newly Redesigned Interface

CounterBooks' Redesigned Interface

CounterBooks, a leading Online Retail Accounting Management Suite for the fuel, convenience and general retail industry, is pleased to announce today, the launch of the redesigned graphical interface of CounterBooks.

The focus of the redesign has been to improve the user experience from daily reconciliation through to real time reporting. This follows a series of exciting developments at CounterBooks including the introduction of the Retail Management Information System and the Billing Control System.

The same great features and benefits of CounterBooks have been maintained but navigation has improved with fewer clicks, easy to follow navigation (breadcrumbs), dynamic menus and enhanced drill down. The redesign is currently being rolled out to all CounterBooks’ fuel, convenience and general retail clients in the UK and across Europe.

John Roberts, Managing Director, CounterBooks said “Having launched the first cloud based version of CounterBooks in 2003 we started on a redesign in 2013 and I am delighted to be able to roll out the new system to all of our customers this autumn. With over 1000 files and 150 pages to modify, our IT team had their hands full and I’m pleased to say, they did a great job. Enjoyment and accounting systems use probably don’t go hand in hand, but I am sure our customers will love the improvements.”

To learn more about CounterBooks please visit www.counterbooks.com

About CounterBooks
CounterBooks was developed in 2001 – 2002 and launched on 1st January 2003 as the world’s first on-line full ledger accounting system designed specifically for retailers. CounterBooks was originally developed as a Pro-Retail MS DOS system by a frustrated computer-programmer-turned-retailer who struggled with traditional accounting systems which were not developed for retail businesses. His aim was to provide an easy to use system suitable for a retailer with no accountancy experience while still providing full easily understandable data reporting.

For further information about CounterBooks, including case studies, images or interviews, please contact, Laura Shafer – Marketing Assistant:-

Telephone: +44 207 099 1050
Email: lshafer@CounterBooks.com
Website: http://www.counterbooks.com