Top 4 ways the finance team adds value in a retail business

Finance teams are valuable business partners at many retail companies.

Be more than a number cruncher and become a vital ingredient to the success of your retail organisation. Below are the top four ways the finance team adds value to a retail organisation.

1.    Business planning

Help to focus business planning on ways to continually innovate and adapt to the changing landscape and look for opportunities both at home and abroad.

Business planning involves some key areas where a finance team can command a seat at the leadership table:

 

 

2.    Improve working capital through inventory efficiencies

Retail businesses are made and broken by their ability to predict and manage inventory levels to meet demand without an oversupply.

Here are three steps to improve your working capital situation by ensuring an efficient inventory system.

Step 1: Analysis at the Stock Keeping Unit (SKU) level

Analyse current raw material, work in progress and finished good inventory at the SKU level to drive inventory efficiencies. This helps understand the value and level of inventory, plus coverage costs for each SKU against historical and future demand.

Related: Learn more about how consumers have changed the way they buy, and what this means for the way businesses need to plan for growth

Avoid completing this analysis at the category level though – it can hide individual SKU under or overstocking issues.

Step 2: Identify the key drivers of inefficiencies

Your inventory analysis at the SKU level completed in step 1 now becomes your base reference to identify the causes of inefficiencies:

 

 

Step 3: Putting it all together

Once you have completed your inventory analysis and identified the sources of inefficiencies, it’s time to move into problem solving mode.

This is where it’s crucial to engage with other areas of the business, such as production and sales teams, in order for them to see where the inefficiencies lie, and what some possible solutions are.

View this article as an infographic (PDF)

3.    Transfer pricing and international retail expansion

Expanding into overseas markets is a major source of growth for Australian retailers, especially given the relative market size compared to other countries.

As a finance professional, your involvement in the global expansion strategy ticks all these boxes:
  • Complex tax issues are managed and profits taxed reasonably
  • Documentation of transfer pricing policies and ensured compliance at local and cross-jurisdictional levels
  • Reduce risk of double taxation scenarios and manage the interaction between transfer pricing, custom duties, royalties and withholding taxes
  • Define and document the entity that creates value to minimise risk and possibly obtain tax deductions.

4.    Shopping for growth through mergers and acquisitions


Mergers and acquisitions are proving to be major sources of growth in the retail sector in Australia, especially with low levels of consumer confidence and high levels of competition.

A recent review of global retail deal activity over the past four years by Grant Thornton revealed that Australia placed seventh in terms of deal volume – a high ranking considering the relative size of Australia’s economy.

And surprisingly, the majority of the deals were in the food retail category:

 

 
With the increasing likelihood of M&A activity becoming a major source of growth, your expertise will become invaluable.

This article was brought to you by Grant Thornton. See their full retail industry report here.