Maintaining an effective accounting system

Although accounting systems used in retail vary in complexity and expense, the basic requirements for an effective system remain the same. It may be a simplistic evaluation, but the best retail accounting systems are those that do what the retailer requires in a timely, secure, and user-friendly fashion.

Aligning record keeping systems with business directives

Selecting the appropriate record keeping system can be a challenging process for retailers. For the majority of store managers, the decision will be made for them, and their responsibility is to use the system as effectively as possible to support the achievement of business objectives.

The storage and recording of information on financial record keeping systems needs to be done by overarching business directives while complying with any relevant legislation that may prescribe the protection and privacy of personal information.

This is a fundamental requirement of retail record keeping systems and understanding and adhering to directives around what data is to be stored, how it is to be stored, who has access and how the information can be used to generate business reporting is essential.

Monitor sales, revenue and expenditure data

Early in the budget cycle, the retail managers should create key financial documents for the coming budget period.

The required documents are:

  • Balance Sheet
  • Profit and Loss
  • Cash Flow reports

The key financial target areas are cash flow and profitability, and they need to be tested to evaluate whether targets are likely to be met. If results fail to meet targets, they must either change their plans or revise their targets, or both.

Once it appears that the targets will be met, more detailed budgets can be built with plans for running the business, (such as a category buying plan, a marketing plan, and training plan, etc.). When these three reports are used in this way, they are often called Pro-forma Budget Statements. At the end of the budget period, these statements are again prepared, this time comparing actual performance with the budgeted figures for previous periods.

The use of pro-forma budget statements can assist retail managers in monitoring sales, revenue, and expenditure data throughout the financial period in question. This is important as a frequent comparison of actual performance against budget targets allows managers to have an up to date take on the performance of their store relative to targets and a perspective on business that addresses areas of concern proactively.

Cash Flow

One of the biggest problems facing small to medium sized retail businesses is the level of liquidity they have, or in other words, their ability to meet their financial obligations when they fall due. Often these businesses will still be trading and may show a profit on paper but find themselves insolvent.

The Cash Flow Statement tells how a business uses and generates its most important asset – cash. Without cash to pay the bills when they are due, a business cannot continue and must go into liquidation. Consequently, cash management is just as important as being able to generate profit.

Some argue that it is more important because it is possible to be profitable and still not have enough cash to continue to operate. However, being profitable does not by itself pay the bills. If cash is squandered (for example, by building a new store that costs a lot, but does not produce an increase in revenue), then the business will have to close if it has insufficient cash to pay its debts and meet its obligations.

As well as the core operations of a business, the Cash Flow Statement considers all other elements of the cash movement within an organisation. These can be grouped into three separate sub-headings:

  • Cash flow from operations (trading or carrying out the core business).
  • Cash flow from investing (buying and selling non-current assets).
  • Cash Flow from financing activities (raising or retiring equity, or long-term debt).

Maintaining financial, personnel and payroll data

The security of personal data is stipulated by legislation, and internal business policies and procedures generally direct that of financial data.

There is no room for error in maintaining data of such sensitivity and importance.

Often personnel and payroll data will be stored in a human resources information system (HRIS) that may interface with the financial record keeping system of the business. For smaller retailers, this is less likely, and in those cases, it is essential that additional steps be taken to manage data sensitivity, accuracy, and privacy effectively.

If in doubt about the requirements of your business in the handling of personal and payroll data, please refer to your HR team as laws vary state to state and internal practices vary business to business.

To learn how to steer your success as a team leader, the ARA Retail Institute runs multiple workshops on leadership and team culture. Join the ARA Retail Institute in their latest course which focuses on participating in retail merchandise management activities to deliver profitable results for a retail organisation.


About ARA Retail Institute

ARA Retail Institute is Australia’s leading retail training provider for both accredited and non-accredited learning programs. For more information, please visit:



Supporting your team after traumatic events

The recent tragic events in Westfield Bondi Junction have shaken the retail industry, not just in Sydney but around the country. Obviously, the people from our sector most impacted were

Retail Voice CEO Message: 3 April 2024

I hope you and your teams have experienced a successful Easter trading period. Whilst the holiday break is expected to deliver something of a sugar hit, overall Australians continue to cut

Retail Voice CEO Message: 27 March 2024

With Easter break kicking off on Friday, we wish you and your teams a successful and enjoyable holiday period. Our full set of projections for the Easter weekend, in partnership