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How an Outsourced CFO Can Help You Establish Accounting Practices To Minimize Risk and Maximize Profit
An outsourced CFO can provide your small business with the accounting services and financial management advice you need to successfully navigate from your break-even point, so you can maximize profits and boost ROI.Read more
Leveraging the Expertise of an Accounting and Advisory Firm to Support and Optimize Your Accounting System
This fourth article in our series outlines the benefits of partnering with an external advisory firm in optimizing your business finances. We look at the comprehensive services offered by outsourced accounting specialists and how they can support your in-house teams and processes toward ideal results throughout the work year. Bookkeeping is an essential aspect of […]Read more
Lagerquist’s third part of an in-depth blog series explores how partnering with a reliable external accounting and advisory firm can help your company avoid five of the biggest pitfalls faced by businesses. External accounting specialists provide extensive real-world experience that help companies navigate the most significant financial challenges with minimal guesswork.Read more
How to Select the Best POS System for Your Retail Business – Part 2: Managing Inventory and Profitability
Posted by Sylvia Lagerquist, CPA
Small retailers have many priorities to address as they seek to thrive in today’s hyper-competitive marketplace – especially as the bricks-and-mortar retail sector consolidates and online retailing continues its rapid growth. Priorities typically include selecting the retail location; outfitting the store with fixtures and displays; and selecting products to offer.
One of the less glamorous priorities — but one that is increasingly essential to your overall success — is the selection of your Point-of-Sale (POS) system. In a previous era, small retailers simply chose the POS system (or cash register) that their merchant bank would recommend, or in many cases, they didn’t have any choices at all.
Today, the range of options can seem overwhelming and the differences in POS products are dramatic. As retail customers become accustomed to having more ways to find, select and pay for your products, it’s critical that your retail POS provide the support you need to meet and exceed those expectations.
In fact, POS systems today can be very sophisticated and offer a wide range of capabilities, which is why we’ll discuss them in depth across two articles. In this article, we’ll focus on the inventory and profitability management aspects of POS, and in the first article – which you can read here — we discussed the payment acceptance and processing components.
Here are four considerations you should evaluate carefully as you consider the inventory, purchasing, employee and management components of POS for your small retail business:
1. Understand Your Inventory
We tend to think of a POS system as just that — a system for managing the Point-of-Sale, where the customer pays for products and the cash register (and credit card reader) are installed. But the real ‘secret sauce’ of POS systems is in their ability to provide you with accurate, immediate information on your inventory.
What separates systems from one another in this area is how sophisticated their inventory management capabilities are. For example, some systems allow you to automate tasks and alerts to address things such as product counts (notifying you when a product count goes above or below predetermined levels), setting re-order thresholds for purchasing, and tracking product details.
Product management is another key part of inventory control, and depending upon the number of SKUs your business carries (and most carry thousands), it may be essential for you to be able to easily add, update, remove and otherwise maintain and modify your product records (including pricing options, discounts, sizes and colors, stock and tax details, etc.).
2. Plan for Purchasing Success
The first advantage your POS system should be able to bring to purchasing is, quite simply, the ability to take inventory data and use it to automate or preconfigure purchasing activities and processes. For example, the system should enable you to quickly compile a draft purchasing plan showing all items currently running low, and those predicted to run low during the next purchasing cycle.
But a powerful POS can go far beyond that, and help you make better-informed decisions about purchasing strategy. For example, if you heavily discount a product in order to move it, your inventory report and forecast may indicate that you should purchase more. However, a more sophisticated system can take discounting and other factors into account, to help you avoid restocking weak product and instead focusing on better options.
3. Let the Tech Help Manage Your Team
Today, many if not most POS systems also serve as an overall operations management platform for the store, including employee management and timecard tracking. This allows you to implement security and safeguards that are essential to protect your business. For example, a more advanced POS system will allow you to confirm that a manager is on duty during all open hours, and then require the manager’s sign-on in order to execute certain transactions (such as returns and exchanges).
In addition to ensuring that the right people are on duty and working at the right time, your POS system can also give you information to help make better staffing decisions (such as busy times vs. slow times and sales by employee). And, more and more stores are also empowering their retail staff by adding mobile devices such as smartphones and tablets to the payment equation, allowing them to ring up transactions with roving POS capabilities throughout the store.
4. Use Reports and Integration to Drive Profitability
In addition to the overall benefits that come from using a computer database to manage complex business activities, the fact of the matter is that your POS can help you achieve a real leap in growth by providing you with better information with which to make future decisions.
Decisions like, “How can I optimize store hours to keep overhead low while still maximizing sales?”, and “Which products should I carry more of in order to increase profitability?” are now answerable with the right POS system in hand.
On the reporting side, one key priority will be the ability to drill down through reports into further details — for example, going from a list of products that exceeded their sales threshold for the month into the average purchasing cost of a given product in the list.
Product performance reports will also allow you to evaluate seasonal trends, discounting factors, profit margins, quantity discounts from your vendors and more when determining how best to configure your product mix and stock levels.
Along with reporting is integration. Integration allows you to extend your POS system’s data and capabilities, and with the right vendor you should be able to connect your POS to a number of other platforms. The first among these is your accounting software (likely QuickBooks or Xero), but beyond that your POS can provide the opportunity to drive special offers and email/social marketing to customers; connect timecards to your payroll system; sync bricks-and-mortar retail operations with online and eCommerce channels; and more.
These four considerations — inventory, purchasing, employees and management — are by no means an exhaustive list of considerations for POS system selection.
However, they will give you a solid framework from which to work as you take the time to properly evaluate and ultimately select the very best POS solution or your retail business…for today’s needs and tomorrow’s opportunities.
Image Credit: Seika (Flickr @ Creative Commons)
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