South African retailers face numerous macro-economic, socio-economic, political, and operational challenges. In a world where finance departments are driving to be business partners inside the organisation, the ability to facilitate relevant operational and financial plans is as necessary as having products on the shelf.

Understanding the strategic adjustments retailers are making in this environment reveal the changes finance teams must do to support the business. For example, the growth of mobile as an e-commerce platform has resulted in the need for multiple channel financial reporting and planning. Retailers still struggle to understand the precise financial effect that this has already had and still might have on the business.

A Qualitative Approach

Another planning challenge is the quality of the plans that business management teams produce at critical times throughout the year. In most organisations, remuneration is linked to budgets. And the likelihood that budgets will only be approved based on adequate growth determined by the latest applicable forecast, sets the scene for the start of the traditional ‘budget games’.

This often results in a process that leaves the business with a shallow Q4 forecast, soft budgets and an executive team that struggles to sell the future of the business to stakeholders. Furthermore, each side attempts to anticipate the others’ next move, protecting against too much internal stretch and having as much budget as possible to operate the business the same was the year before while being able to cash in on expected remuneration.

Most CFOs must unpack whether the last forecast before the budget cycle commences is being manipulated to produce a low budget. There are several processes and technologies available to finance teams that allow them to test the likelihood of business units achieving their forecasts relevant to both prior year and current year trends. This enables them to challenge forecasts with system generated probability assessments and ensure an accurate view of the year-end forecast in the final quarter.

The benefits of innovation are not restricted to the products and services organisations have to offer. In an environment where this determines longevity, finance teams can play their part by innovating their processes to provide the business with meaningful decision-making information as well as more productive financial processes. All of which can help retailers unlock potential strategic initiatives and give them a competitive edge.

Financial Flow offers financial management for physicians at every professional stage. Our guidance is proactive care for your long-term financial well-being.

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