The way CFOs operate has shifted as a result of the continuously changing retail landscape. Today's retail CFOs must be at the forefront of technology, setting the standard for how retailers collect and use their data, particularly in financial planning. This goes beyond merely crunching numbers.
Modern retail financial planning requires data agility and the CFO's office's cooperation in adopting a more flexible approach. This is because a slew of external factors are posing unprecedented obstacles to retailers' financial planning processes.
Traditional retailers are facing competition from new digitally native brands. These new retail competitors recognize the importance of harnessing consumer insights and data to drive retail sales forecasting. And even though they approach the market with a digital-first perspective, they are moving alarmingly quickly into the world of brick-and-mortar retail.
Consumer expectations in the retail industry have risen as a result of growing connectivity between brands and the general public. The challenge for retailers is to embrace a customer-centric strategy by responding quickly to shifting expectations.
Fluctuating consumer demand and improved digital opportunities have also made it clear how important it is for retailers to maximize employee productivity.
Ultimately, retail financial planning solutions should assist the CFO in maximizing resources, leveraging sales opportunities, and responding to customer demands. This requires intelligent financial data that can move in real-time.
Here are three of the most common obstacles retailers face with corporate financial planning and how to overcome them.
1. Quickly Adapting to Customer Expectations
For the purposes of budgeting and forecasting, a quarterly examination of financial results is insufficient. Today's retail financial planning requires more flexibility and agility than ever before. That's because there are now more and more options for consumers to interact with brands. They anticipate a more individualized approach to retail, one in which establishments and brands customize interactions for each customer's particular situation.
Of course, thorough data is necessary for CFOs to make broad-based, well-informed decisions for their companies at a macro level. However, consumers expect service on a micro level. For instance, what may be effective for one group of consumers in one region won't necessarily appeal to shoppers in a different location.
A retailer's ability to quickly react to consumer trends depends on their ability to drill down into micro financial data at the store level. And when it comes to the financial planning process, it continues to be one of the biggest challenges for retail CFOs.
Intelligent financial planning software can make all the difference. Finance departments can have access to transparent, real-time reporting of financial results at the store and regional levels. This is essential for comprehending consumers' geographical preferences and locational expectations, which can differ greatly.
Furthermore, having control over key financial data from the point of sale onward makes it easier for finance to discover factors that affect a customer's relationship with the brand.
2. Leveraging Data on the Fly
For retailers, understanding their merchandise and how it performs is just as important as understanding their customers. Retailers must strategically think about how to display, advertise, and sell their acquired product in addition to getting it into stores via the supply chain.
Poor merchandising can have a detrimental impact on retail organizations by lowering their overall profitability. For finance professionals tasked with merchandise financial planning, it is vital to turn inventory into sales.
To understand how items are doing and how they are contributing to overall sales, corporate financial planning and analysis (FP&A) software must be sophisticated enough to drill down to the most basic levels of retail data, such as SKU number. Additionally, this software must be able to complete the task quickly.
Implementing a solution with perceptive FP&A skills will assist in transforming the most basic retail financial data into consumable real-time reporting, which is required for guiding critical business choices on the fly. Clear sales data broken down by category or department speeds the financial planning process and improves the retailer’s ability to budget and forecast. This creates solid financial insights that enable actionable decision-making for retailers.
3. Utilizing Human Resources to the Fullest
Wide-scale layoffs in the retail industry have been caused by the recent increase in digital sellers. Much of this is due to the closing of many traditional retailers' brick-and-mortar locations. Despite this, the operation of retail businesses still depends on the knowledge and assistance of human resources.
For example, the shift to direct-to-consumer online sales has reduced the number of in-person salesmen while opening up new potential in other key business areas. Retailers have been compelled to look for methods to expand their workforce in areas like marketing and technology.
With new ways of working becoming the norm, the obstacle for retailers is to maximize the efficiency of their remaining workers in order to achieve the best financial results.
Very often, management of personnel is delegated to the human resources function. However, maximizing personnel can—and should—include a significant financial component. This can be accomplished by including people planning in the company's financial planning process.
Savvy businesses know that their people are a reflection of their brand. Employee satisfaction is a key factor in a company's overall financial success since happy workers are effective brand ambassadors. For this reason, part of the financial planning process should be the evaluation of financial outlay to employees.
The ability to assess payroll, benefits, and tax implications assist finance in identifying issues that could impact a retailer's overall performance. Including benefit planning and financial modeling for decisions like whether to offer employees merit increases should practically speaking, be part of the financial planning process.
Strong FP&A software can also assist finance in tracking personnel headcount on a geographical basis. When deciding whether to hire more people or downsize the company, this can help with financial and organizational decision-making.
The Bottom Line
In today’s new retail landscape, technology cannot be separated from the financial planning process. The CFO and the finance team are ultimately important for fostering solutions that offer valuable insights.
Ignoring consumer specifics, not emphasizing data flexibility, and neglecting to leverage human resources impair a retail business's overall competitiveness.
Retailers can, however, use financial planning processes to get around these obstacles by using predictive FP&A software.