The 3 Biggest Challenges for Corporate Retail Financial Planning (and Tips on Overcoming Them)
The rapidly-shifting retail landscape has changed the way CFOs operate. More than just crunching the numbers, the modern retail CFO now needs to be at the forefront of technology, leading how retailers collect and use their data—especially in financial planning.
Modern retail financial planning requires data agility and the support of the CFO’s office in taking on a more flexible approach. That’s because myriad external factors are creating unprecedented challenges for retailers when it comes to the financial planning process.
New digital-native brands have popped up to challenge traditional retailers. These new retail competitors understand the value of harnessing consumer insights and data to drive retail sales forecasting. And while they enter the market with a digital-first lens, they are breaking into the world of brick-and-mortar retail with alarming pace.
Growing connectivity between brands and the public has increased consumer expectations in the retail sphere. Retailers are challenged to embrace a consumer-centric approach by responding quickly to shifting expectations.
Enhanced digital opportunities and fluctuating consumer demand have also driven home the real need for retailers to maximize the productivity of their personnel.
Ultimately, retail financial planning solutions need to support the CFO in maximizing resources, leveraging sales opportunities and responding to consumer needs. This requires intelligent financial data that can move in real time.
Here are three of the biggest challenges retailers are facing in the corporate financial planning process, and solutions to overcome them:
1. Adjusting Quickly to Customer Expectations
It’s not enough to review financial results on a quarterly basis to inform budgeting and forecasting. Retail financial planning of today requires more flexibility and agility than ever before. That’s because consumers can now interact with brands in more and more ways. They expect a more personalized approach to retail, one in which stores and brands tailor experiences to their unique circumstances.
CFOs of course need thorough data to make broad and informed decisions for their companies at a macro level. But consumers expect service on a micro level. For example, what may work for one group of customers in a particular region won’t necessarily resonate with shoppers in a different location.
The ability to drill down into micro financial data at the store level is crucial to a retailer’s ability to quickly adjust to consumer trends. And it remains one of the biggest challenges for retail CFOs when tackling the financial planning process.
Intelligent financial planning software, like Tidemark, can make all the difference. Finance departments can access transparent, real-time reporting of financial results at regional and store levels. This is crucial to understanding consumers’ geographical preferences and locational demands, which can vary widely.
Crucially, having a handle on vital financial details from point-of-sale onward helps finance to more easily identify variables that impact a customer’s relationship with the brand.
Successful promotions can be added and managed same-day based on real-time outputs in financial planning tools. Product inventory and stocking can be closely monitored and amended as part of the retail financial planning process. And most importantly, retailers are able to quickly and easily make adjustments at the store level to cater to their customers.
2. Leveraging Data on the Fly
In addition to understanding their customers, it’s essential for retailers to understand their merchandise and how it performs. Beyond getting product into stores via the supply chain, it is necessary for retailers to think strategically about how to display, promote, and sell their acquired product.
Poor merchandising can negatively affect retail businesses by reducing their overall profitability. For finance professionals tasked with merchandise financial planning, it is crucial to turn inventory into sales.
Corporate financial planning and analysis (FP&A) software needs to be savvy enough to drill down to the most rudimentary levels of retail data—such as SKU number—to understand how products are performing and how they are contributing to overall sales. And this software needs to be able to do the work quickly.
Perceptive FP&A abilities in systems like Tidemark help transform the most basic retail financial data into digestible real-time reporting, necessary for informing vital business decisions 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. Even more helpful is when intuitive financial planning software offers packaged retail processes that guide financial reporting. Retailers can leverage existing productized functionality to understand sales volume forecasts and breakdowns by category.
They can easily realize the makeup of Unit Cost Price calculations to improve profit margins or to adjust pricing models. The resulting outcomes enable businesses to respond expeditiously to adjust product promotions, amend in-store placement, and forecast merchandise inventory.
3. Getting the Most from Their Human Resources
The recent uptick in the number of digital sellers has led to wide-sweeping layoffs in the retail sphere. Much of this has stemmed from the closure of many brick-and-mortar locations of traditional retailers. Despite this, retail businesses still require the expertise and services of human resources to operate.
Case in point: The move to direct-to-consumer online sales has reduced the number of in-person salespeople, but opened up new opportunities in other key business areas. Retailers have had to look at ways to bolster their workforce in functional areas including marketing and technology.
With new ways of working becoming the norm, the challenge for retailers is to maximize the efficiency of their remaining personnel to support the best financial results.
Very often, management of personnel is delegated to the human resources function. However, finance can—and should—play a huge role in maximizing personnel. This can be done by integrating people planning into a company’s financial planning process.
Savvy businesses know that their people are a reflection of their brand. Satisfied employees are powerful ambassadors for a company and contribute to its overall financial success. For this reason, part of the financial planning process should be the evaluation of financial outlay to employees.
The ability to analyze payroll, benefits, and tax implications helps finance pinpoint factors that can affect 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 help finance track employee headcount on a geographical basis. This helps to inform financial and organization decision making when considering the ability to hire or downsize.
Tidemark also enables retail finance professionals to leverage predictive modeling to support their financial planning processes. By transforming important financial figures into powerful visual data, retailers can easily see areas of personnel improvement that will help shape their bottom line. This includes providing insights that help businesses understand the financial implications of wage and merit changes, identify employee skill gaps, and detect opportunities for staff hiring and retention. Integrating these important facets as part of the FP&A process ensures retail businesses are getting the most out of the people they invest in.
The Bottom Line for Corporate Retail Financial Planning
In today’s new retail reality, technology cannot be separated from the financial planning process. Ultimately, it is up to the CFO and the finance team to champion solutions that provide actionable insights.
Ignoring consumer specifics, not prioritizing flexibility of data, and failing to maximize human resources reduce the overall competitiveness of a retail business.
However, by enabling predictive FP&A software, retailers can leverage financial planning processes to overcome these challenges. Tidemark provides dynamic financial modeling specifically catered to retail, helping to speed access to crucial financial data needed for reporting. With key guided processes to better understand planning at the store, merchandise, and people levels, retailers can turn today’s challenges to opportunities for growth and profit.