For retail businesses, the practice of financial planning and analysis (FP&A) may appear to be outside the main tasks of choosing, purchasing, and selling merchandise to customers. However, it plays a vital role in the strategic planning process for retailers.
According to The AFP Guide to the FP&A Maturity Model, "FP&A translates corporate and business strategy into a financial plan and supports the implementation of that plan through resource allocation. It generates input and insight through financial analysis, supported by enabling technology."
The report also emphasizes that FP&A is a fundamental aspect of Integrated Business Planning, which is defined as the "ability to translate the strategic plan into a strategy that coordinates the company, can be measured and can be monitored." This includes forecasting, budgeting, and operations planning.
Having strong skills in these areas can lead to better decision-making and increased competitiveness. However, many retailers who are still in the early or middle stages of digital transformation have not yet fully embraced FP&A, which is a vital component of Integrated Business Planning.
According to research from RetailWire, only a small percentage (19.4%) of retailers use a decentralized FP&A process where each department, brand, and channel directly inputs their data into a platform that generates the consolidated financial plan. Instead, most retailers still heavily rely on traditional spreadsheet methods to manage their core business processes. The study found that 77% of survey respondents use spreadsheets for merchandise financial planning, and 63% use them for allocation, replenishment, and logistics.
As retailers move towards digital transformation, they realize the importance of achieving data accuracy, speed of insights, and quick decision-making with accountability. Keeping core merchandising and operational activities in line with the business and financial strategy becomes more challenging as business scales and operations speed up.
External pressures such as competition, supply disruptions, cost of goods, transportation, and labor require flexible planning tools with strong strategic compliance, which can be achieved with the right FP&A platform.
Butternut Box Scales with the Help of the Right FP&A Solution
Butternut Box, a London-based company that specializes in preparing and delivering fresh and healthy dog food across the UK, Ireland, Netherlands, and Belgium, recently sought to find a way to improve its financial reporting and planning, increase the finance team’s capacity, improve collaboration and agility, and prepare for continued growth.
According to their Head of FP&A, Charlotte Kelly, Butternut Box lacked sufficient reporting tools and relied heavily on Google Sheets and Excel for their financial processes. “We knew we needed a way to make reporting quicker and easier and have more confidence over the source of truth on our data. We were getting to a stage where our processes were breaking and we needed a new solution.”
When Kelly joined Butternut Box, she had several objectives in mind, one of which was to find a technological solution that could handle weekly financial reporting and 13 financial closes per year after each four-week period. Additionally, the company needed a solution that would enable rolling forecasts, scenario planning and accelerate financial processes, and serve as a single source of truth for the company's financial data.
Furthermore, Kelly emphasized the importance of finding a solution that was easy to use, had a fast implementation time and would allow the team to quickly become familiar with the software.
After looking into a variety of different tools, including Web-based FP&A platforms and those that work with Excel, Butternut Box decided to implement Datarails, a financial planning and analysis software.
Datarails has had a significant impact on Butternut Box's financial operations by providing a flexible and customizable FP&A platform that fits the company's specific reporting needs.
It has not only enabled the company to cut its weekly reporting time in half, but it has also streamlined its other financial processes such as 13 four-week financial closes, budgeting, forecasting, cash flow reporting, scenario planning, and building KPI dashboards by reducing manual effort and minimizing the risk of inaccurate data due to human error.
By helping Butternut Box save time on financial processes, Datarails has helped Kelly and her team to focus on more valuable tasks and allowed the company to scale its operations without the need to increase its team size.
“Thank goodness we went ahead with Datarails, because otherwise there’s no way we’d be where we are as a team without it,” said Kelly.
Conclusion
Financial planning and analysis play a vital role in the success of a retail business. It acts as the "heartbeat" of the enterprise, providing the necessary information and insights to manage cash flows, operational costs, and inventory investment effectively.
A strong FP&A capability is essential for the formulation and execution of strategy and for making informed decisions that optimize growth and profitability. Overall, investing in FP&A software is crucial for the long-term success and scalability of any retail company.