If you work in the retail business, you certainly know the importance of financial management for the sector. After all, it is through this work that you can balance expenses and income, and also plan the development of your company in the short, medium and long term.
Therefore, it is advisable to keep an eye on some practical, efficient and assertive means to ensure the good financial health of your business. Therefore, in this post we will explain not only the importance of financial management for retail, but explore what should be done, precisely, from the most common mistakes, which are:
- Mix personal and corporate accounts;
- Neglect the accounts and operations records;
- Ignore the importance of stock control;
- Underestimate the importance of cash flow;
- Believing that it is possible to do everything on your own;
- Segment the company's own sectors;
- To blindly trust the results.
Now that you know what we’re going to talk about in the following topics, follow along with this reading and learn from us to ensure greater efficiency in your professional day to day!
The importance of financial management for retail
Between the years 2014 and 2017, the UK residents retail sector witnessed the closing of 61,700 stores. Among the reasons for this, the lack of financial management was highlighted as one of the most present factors.
We can also consider other significant elements, such as the political and financial crisis that hit the country in the same period. But in general, the efficient financial management for retail can help minimize the negative effects of external scenarios like the crisis itself.
Therefore, with more discipline and administrative notions to manage your resources, it is possible to prevent negative influences that, directly or indirectly, plague entrepreneurs in search of the gradual and sustainable development of their companies.
Not to mention that a good job, in this sense, provides powerful advantages for the growth of your brand, such as:
- facility to direct investments in different areas of the company;
- bigger control of the entrances and exits, contributing to an unshakable financial health;
- practical notions of the best times to invest or retain costs;
- more precise perception of the values and risks – and the need – to apply for loans and financing;
- greater security to prevent your company from going bankrupt.
In other words, they are reasons that should encourage any entrepreneur to change habits and avoid as much as possible the most common financial management errors for retail!
In addition, did you know that you can reinforce your work routine through other actions? To learn more about it, save it for later reading another article from us, this one specifically talking about what it is and how to implement a competitive strategy style=”font-weight: 400;”>!
The 7 retail financial management mistakes to watch out for
Now that you have understood some of the advantages and the relevance of practicing good financial planning and responsibly managing your company's resources, let's see what are the most common mistakes that entrepreneurs make, so that you learn to avoid them in your management!
1. Mix personal and corporate accounts
Perhaps the most common mistake of microentrepreneurs. Many think they can balance expenses and resources efficiently – when this is far from the truth.
According to SEBRAE, some small and medium-sized companies tend to fail within two years of operation – 24.4%, according to a recent survey -, and whose percentage grows even more in the following two years (reaching 50% of the total companies opened in that period).
Therefore, consider the separation of accounts so that there is no confusion and, also, inaccurate data in your financial management for retail. Because it is common to see the bank account and use it for personal expenses – and vice versa – thinking that we will cope with this deficit.
Remember that, however small the size of your company may be, there are unique conditions that are linked to your business and others, exclusively to your private life. Do not mix things up and look for account options that privilege the small business owner – whether with attractive rates or even exemptions.
And, if you don't have knowledge about the sector, be sure to hire a professional qualified to assist in its financial management for retail.
2. Neglecting account and transaction records
Every entry and exit must be properly registered. Even as a complement to the previous topic, the lack of a precise control of your cash flow can cause serious problems to close the account at the end of the month.
Even more so in an industry as dynamic as yours. The margins are getting smaller, to attract the public and generate competitive differentials, and the values must be counted, penny by penny, to ensure that you plan more efficiently and safely.
Now, think of a practical example: let's say you bought supplies (like cleaning products) and you didn't register them. Imagine that this habit starts to become frequent and consider the weight of it when closing the accounts. The embezzlement will be great, it will generate rework and multiple inaccuracies to know, in fact, how much the operations to maintain your business cost.
3. Ignore the importance of inventory control
When we talk about financial management for retail, it is undeniable that you should already know the importance of your stock. After all, we are often talking about products with expiration dates (in this way, the items purchased before must be the first to run on the shelves) and also a more prevented routine against running out of stock.
That's why, learn about product turnover in your company to avoid having the most (and less) of items in stock, facilitating an economic and constant relationship with suppliers and also with their customers – who will hardly have their purchase desires frustrated.
4. Underestimate the importance of cash flow
Retail cash flow cannot be limited to the cash register. No way! Although it is important for everyday life. In the most, it is important to have digital solutions that integrate and allow a more efficient control of your entrances and exits.
As a result, you can set up planning that is more immune to unforeseen events and you have no negative surprises with embezzlement and expenses that you don't know where your resources came from and where your resources went.
We have already highlighted how dynamic the retail sector is. By not paying attention to the relevance of the cash flow, the inflows and outflows can occur so intensely that you will lose all control of your operations – and this is one of the worst scenarios that unfold in a manager's routine. retail.
5. Believe that it is possible to do everything on your own
Many entrepreneurs rely too much on their spreadsheets and the efficiency of their memories. And it is not due to unworthiness, but there are solutions that prevent this exhaustion and the need to depend, exclusively, on ourselves for the success of your company.
Through accessible and easy-to-use technological solutions, entrepreneurs can have complete control of their companies. In retail financial management, technologies can guarantee:
- process automation, ensuring more precision in the control of entrances and exits;
- flexibility for you to analyze reports generated in real time;
- autonomy to act in a more strategic and analytical way;
- economy through a quick investment with immediate effect.
Research, in the market, the technological solutions that have more to do with your company, and understand what they can do to ensure greater power and efficiency in your financial management for retail.
6. Segment the company's own sectors
Even if you have different workflow steps, areas and professional specializations within the company, don't make the mistake of segmenting it to the point that it looks like different companies within one.
With harmony, collaboration and the knowledge of everything that occurs before or after their respective responsibilities, within the production flow, their employees – and the company, as a whole – are moving in the same direction.
This even means that everyone will have similar goals, even if the work of one is completely different from the other.
7. To trust the results blindly
Every company must have good financial planning and know, in advance, what its goals and objectives are. Thus, it is easy to analyze the company's performance from the metrics that matter most.
And, for many entrepreneurs, the results are limited to the number of sales or billing. Although important, are they the only numbers that should be analyzed?
Start to identify the metrics that are best associated with your company's goals, and analyze them as well. Better: monitor them – preferably, in real time with the help of technological solutions, such as a Integrated Management System style=”font-weight: 400;”>. This can add extra layers of security for your business.
With these tips for you to improve financial management for retail, your company will protect itself against unforeseen circumstances and some of the problems that most affect the unsuspecting entrepreneur. And, in turn, it will also take its work to a higher level, bringing it closer to the big companies in the industry.
But, to complement everything we saw here, take the time to leave a comment, in the field below, and share with us the great challenges you have faced (or still face) about financial management for retail!