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Multi-Channel Reporting in Retail Organisations

Let’s dig a little deeper …
Allan Saffy
Allan Saffy, Decision Inc.

In an article I published recently called “How retail finance teams impact their business by transforming financial planning processes that incorporate meaningful operational levers“, one of the problems I touched on was how finance teams are helping business unpack the impact new sales channels are having on the entire organisation.

The example I highlighted was around how the growth of mobile as an e-commerce platform over the last couple of years has seen the need for an effective view of multiple channel financial reporting and planning. Retailers still struggle to understand the precise financial effect that changing channel focus has already had, and might have, on their business. In addition, it becomes difficult to quantify the financial impact that e-channels may have on in-store sales cannibalisation. It is even more difficult to unpack the return on capital invested per channel – this implies being able to accurately derive Net Profit per channel, which is something most are struggling to do.

One of the effective ways this can be accomplished is by leveraging the enhancements technology has undergone in the past 5 years. The technologies available to finance teams that help them accomplish this information enrichment process have become faster, cheaper and able to compute exceptionally complicated allocations and algorithms. The problem is that the majority of these software solutions (not all) are very technical in nature and require large amounts of skilled IT personal to configure the calculations necessary to report on Net Profit per channel. The relationship between finance and IT has always been a challenging one as the speed and flexibility required to change business drivers, allocation calculations and dependency variables, is often found to be lacking by technical IT professionals.

So, faced with the prospect of having to do it themselves, finance teams attempt to tackle this mountain of complexity, by reverting to a familiar technology in the form of Spreadsheets, and do their very best to attempt to deliver on the much needed information enrichment their businesses require. Although spreadsheets check the ease of use box, they certainly fall short on being able to deal with volume and complexity in an accurate and timely manner. The end result is usually either high level views of channel reporting that are lacking in decision making information or overly complex spreadsheets that are riddled with errors, are key man dependent and take forever to compute results.

Imagine a world where, in minutes of financial data changing or business drivers changing, finance is not only able to report on the current and historical ROI (return on investment) of each channel, but also on the  returns  each  are  likely  to  deliver  as a  result  of  future  financial  plans  as outlined in the budget and forecasts. As mentioned earlier, to achieve this financial utopia, making use of the few Financial Performance Management systems that are easy to use, have powerful calculation engines and produce fast results is exceptionally important.

So what does the ideal world look like to the retail finance team when it comes to being able to calculate profitability per channel?

From my experience finance controllers need to:

  • Depending on the quality of the transactional source data, be able to map direct channel revenue and costs to relevant Income Statement accounts and derive bundled costs by means of driver based assumptions.
  • Be able to set up allocation calculations that utilise cost drivers based on percentages, square meterage, revenues or head count.
  • Be able to set up financial plans per channel that are derived from operational drivers that have associated financial metrics.
  • Be able to run profitability scenarios by channel in minutes by manipulating key operational and financial metrics.
  • Be able to produce ad hoc information rich analytical reports in minutes.
  • Have reports and dashboards, with real time updates, available to all stakeholders without the need to distribute packs.
  • Be able to distribute reports with a click of a button, if required.

The benefits of innovation are not restricted to  the  products  and  services organizations have to offer, and in a world where this exact innovation determines longevity, finance teams can play their part through innovating their processes to provide the business with meaningful decision making information as well as more productive financial processes. All of which can help operations unlock potential strategic initiatives giving them a competitive edge.

Decision Inc. is an information technology and advisory company that works with finance teams to help them transform their financial planning and analytics processes from being time consuming, inaccurate and low value-add processes to meaningful efficient processes that contribute significantly to business success. We have extensive experience in implementing complex planning and consolidation transformation projects helping a number of the largest retailers in South Africa improve the value the finance team offers their line of business operations.

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