You didn’t open a pet retail store so you could experience the job of business record-keeping, did you? There’s nothing unusual about that, but not liking to spend time keeping records doesn’t absolve a business owner of the responsibility of doing it.
Retail consultants say it’s very common, however, for business owners to spend far too little time keeping up on their records – and not just financials – and to lose significant profits as a result.
Sher Graham, chief knowledge and energy officer for the Mobile, Ala.-based Synergy Solutions Group, said far too many small business owners fail in this area.
“Most small businesses – and I’ve been a consultant over 40 years – do not see how valuable proper accounting processes and procedures and guidelines are in building a small business or an entrepreneurial venture,” Graham said. “It seems to be the last, and it’s definitely not the first, of their priorities.”
For J.R. Wright, a Cedar Rapids-based consultant who helps small businesses through the organization SCORE, good record-keeping answers many of the questions retailers often scratch their heads and ask themselves when the business isn’t performing as it should.
“Our P&Ls have 20 different lines on them, and I compare them to see what was out of line, and I could look at them and see that a certain number was way off,” Wright said. “An owner needs to do that every single month to see what’s out of line before it becomes a big problem. That way, cost control will work for rent, for utilities, repairs, day-to-day, month-to-month maintenance.”
Good records also reveal opportunities for savings that might not be obvious to retailers.
“The other thing record-keeping would be very valuable on would be the depreciation of equipment,” Wright said. “For a shoe store, most people don’t think there are a lot of expenses or issues there, but there’s countless equipment and shelving and fixtures that need to be eventually depreciated to zero for tax purposes. That’s a very valuable thing to know.”
Inventory is an especially important area, not only for accounting of costs, but also to help retailers understand which of their products are really driving their profits.
Bob Checkaneck, a SCORE consultant based in Myrtle Beach, S.C., says pet retailers can use inventory to set their merchandising strategies.
“Everything is measured in a term called turns,” Checkaneck said. “How many times do you turn over your entire inventory in a year? Very simply, a business that’s not doing well will have one turn. A business that’s doing well will turn over the inventory four times a year. And businesses that are doing eight turns a year are rolling in the big bucks without question.”
Good record-keeping is the key to knowing which items drive your inventory turns.
“The Gap has got certain items, like their chinos and their jeans that are 20 percent of their inventory and bring in 80 percent of their sales,” Checkaneck said. “You’ll very rarely see a discount, and if you do, it will be like 10 percent. Other items, you’ll walk in there and every 30 days they’re discounting it again. Why keep your retail space stocked with items that are not selling?”
The technology available for business record-keeping is very capable, but not everyone is comfortable using it – or using it to its full capabilities. Experts say you have to get over that.
“It’s not just keeping the software current but learning how to use it to the best of their ability,” Graham said. “I have a lot of clients who will ask me the best kind of software to use. Some POS systems may not go into your back office or your Quickbooks. Some business owners are more proficient and they like to do that because they understand the need, but others look at software and technology fearfully. I have it on my computer, but I don’t know how to use it.”
Checkaneck emphasized the time savings and jewels of information that can come from good inventory technology.
“I don’t care what size your store is, the key is to utilize technology,” Checkaneck said. “People go in and they’re doing inventory once a month. We’ve got technology now at all different levels, and the first thing when something comes into your store, it should be bar-coded, and every time you touch it you scan the bar code and record the data electronically. It will take you from two days of hand-counting inventory to about a half-hour. It will also tell you, while you’re taking your inventory, what are those 20 percent hot sellers, and they’ll watch how many times those turn over each month.”
Graham also emphasized that pet retailers need to keep a record of their procedures. Otherwise, functions like employee training, which should be simple, can become nightmares.
“It’s critical for pet store owners to be accountable for how they do business,” Graham said. “That includes how they manage their money and their revenue coming in as well as the money going out, both accounts payable and accounts receivable. Any process that’s in place with customer checks and credit cards, all of those processes need to be written down so that as they hire employees, those employees can be trained and educated on what the policies are for the company. And that’s something that doesn’t always happen.”
Dan Calabrese is a freelance journalist and syndicated columnist based in Wyoming, Mich. He covers a wide variety of industries, including pet retailing, trucking, logistics, railroading, construction and economics.