Avoiding financial pitfalls for global retail growth

In today’s hyper-connected landscape, brands must dream big. From new products to immersive brand experiences, brands constantly innovate to stay ahead and meet evolving consumer demands. Specific to the retail industry in Asia-Pacific (APAC), businesses have been expanding their reach by venturing overseas, with over half of retailers in the region reporting improved performance due to international expansions, according to the APAC Adyen 2023 Retail Report.

However, amidst this drive for expansion and innovation, a sustainable growth strategy relies on a thorough understanding of the company’s finances to make the right decisions, mitigate risks, and ensure long-term viability. As companies expand globally, managing finances across multiple entities becomes increasingly complex, with each entity having its own financial statements and reporting requirements.

With numerous vendors and different payment platforms to account for, reconciling the sheer volume of transactions, especially those involving various currencies and tax regulations, can be challenging if existing systems are not equipped to handle the increased complexity. The risk of inaccurate or incomplete financial data increases, paving the way for misguided business decisions if not addressed promptly.

Keeping up with the scale and complexity of transactions 

A recent BlackLine survey found a startling reality: 99% of business and finance leaders, such as CFOs within the retail, catering, and leisure sectors, harbour doubts about the reliability of their financial data. This pervasive lack of trust stems from reasons such as the multitude of data sources, concerns regarding human error, and the perceived complexity associated with gathering and processing financial information.

In the realm of retail, accounting teams encounter distinctive hurdles unique to their industry. For instance, the lack of timely data from point-of-sale or order-management systems can lead to underpayment from providers, causing delays in order processing and fulfilment. The ability to swiftly reconcile transactions, balance accounts, and convert online payments into cash receipts is paramount for an accurate evaluation of the organisation’s financial well-being. However, for finance teams accustomed to relying on spreadsheets for closing their books, the escalating transaction volumes and complexity may render their once dependable system increasingly cumbersome and error-prone.

Manual processes becoming a bottleneck to planning and operations

Retailers are no strangers to enterprise management technology. They have long relied on software such as enterprise resource planning (ERP) systems to manage core processes across the business. However, many finance and accounting (F&A) teams in Asia still perform the most manual, time-consuming work outside of the ERP – on spreadsheets. ERP systems often lack specialised financial management and automation capabilities necessary for comprehensive F&A tasks. Consequently, spreadsheets have become a convenient solution for recording transactions, performing calculations, and analyses.

As businesses and governmental requirements evolve, data flows on spreadsheets have to be updated manually to match the different currency, regulations, and processes of business units and markets. This process is not only labour-intensive but also prone to human error and inconsistencies, necessitating significant time investments in data cleaning and verification. In addition, the limited real-time visibility into financial data hinders prompt responses to market shifts and customer demands.

By relying heavily on manual processes, F&A teams are prevented from assuming a more strategic role that could drive value for the business, such as helping merchandise planners optimise forecasts and inventory levels. Simply put, this is not sustainable.

Scaling the finance function for success

Achieving sustainable growth hinges on the ability to seize opportunities, optimise supply chains, and expand into new markets while effectively mitigating financial risks. To ensure success, brands must navigate potential financial pitfalls that could hinder long-term profitability.

Empowering the finance function to embrace technology, such as automation, will be crucial to establish a resilient financial management system that can evolve alongside the business. For instance, a large retail company in Singapore revamped their global finance services by leveraging automation to streamline their financial close process. This not only led to efficiency and productivity gains, but more importantly, cultivated a culture where team members are empowered to enhance their skills and drive continuous improvements.

The successful adoption of system improvements relies on business leaders prioritising clear and timely communication. Firms with a strong vision and effective change management are more likely to transition successfully. Therefore, it’s imperative to persuade staff to change hard-wired routines and remain engaged throughout the transition.

In the pursuit of growth, businesses must recognise that solid financial management forms the foundation of sustainable success. Creativity and innovation are essential, but sound financial management will go a long way in sustaining the brand’s growth. By employing technology and automation, empowering finance teams to embrace these tools, and fostering a culture of continuous improvement, brands can not only mitigate financial risks but also uncover new paths for growth and value creation.