Retail margins are under pressure from the continued cost-of-living crisis and subsequent decline in discretionary spending, driving many businesses to look for ways to reduce their costs.
But while labour and marketing budgets are typically the first to be put on the chopping block, retailers may be overlooking opportunities to reduce costs in the back end by automating everyday finance functions, such as accounts payable and accounts receivable.
“I think you find that in retail, getting started in those sorts of projects requires senior management, usually the finance team, to really understand what’s possible,” Christophe DuMonet, managing director of Esker Australia, a global cloud platform that offers AI-based order-to-cash and source-to-pay solutions, told Inside Retail.
“Usually, they’ve either had some success with automation in other organisations and they want to bring it into their organisation, or they see that the technology is improving day to day and they want to get more active.”
Reducing errors, freeing up resources
According to DuMonet, there is a lot of variation in the back-end systems currently being used in retail. While larger organisations tend to have state-of-the-art ERP software and shared services centres filled with back-office staff, many smaller retailers are still using older systems that require a lot of manual data entry.
“If I go to my local bottle shop, I can see that the guys in-store are doing accounts payable and processing invoices from their suppliers,” he said.
Even in larger organisations, it’s not uncommon for store staff to be asked to perform certain back-office duties during their “downtime”.
This is problematic for a few reasons: store staff are not experts in back-office operations and could make mistakes, and they’re not focusing on customer-centric activities, which they’re more likely to be skilled at, such as promotions, product and loyalty activities.
By automating everyday finance functions, retailers can address these pain points, even if they don’t have a large back-office staff.
When it comes to onboarding suppliers, for example, the right technology can be a huge time-saver, especially given the increased requirements around ESG (environmental, social and governance).
“You can have systems that not only do the onboarding but also the recurring maintenance of suppliers. In the past, people would have to remind themselves to chase suppliers for the latest certification,” DuMonet said.
“With automation in onboarding, credit management, and then processing incoming invoices, right-matching of your purchase order…the automation reduces errors, but also frees up time for people.”
Spotlight on The Just Group
Another benefit of streamlining a business’s finance functions is improved supplier relationships.
The Just Group, which owns Peter Alexander, Smiggle, Just Jeans, Portmans, Dotti, Jay Jays and Jacqui E, found that it reduced the response time for supplier queries by 60-65 per cent after implementing Esker’s accounts payable solution, which enables suppliers to submit invoices directly to a centralised platform.
“We don’t have to go looking for information anymore because it’s right in front of us, ready to use,” said Frank Prinzi, systems and accounts manager at The Just Group.
The Just Group has noticed a substantial decrease in the volume of emails and phone calls from suppliers. And even more significant, Prinzi said, is that the technology will scale with the business, so it doesn’t need to invest in additional resources as it grows.
This is crucial since many retailers are facing cash flow pressure in the current economic environment.
“With interest rates being high, that business development mindset might be slowed down by the reality of financial situations,” DuMonet explained. “By putting a bit more effort into what’s happening in back-office operations, that frees up cash for some of those business development activities that otherwise would have to be scaled back.”
Beyond AI
While artificial intelligence (AI) is certainly a buzzword in retail right now, DuMonet noted that Esker has been using machine-based deep learning to accelerate its automation solutions for years.
“In different areas, like collections and cash management, we’ve been using AI to be able to automate this much faster than before,” he said.
AI is particularly helpful for complex finance tasks, such as understanding when a payment is an aggregate payment over thousands of invoices and correctly identifying which invoices are covered by that payment.
But beyond AI, DuMonet believes the ability to improve the employee experience through automation is the biggest opportunity businesses should be aware of.
“It is basically preventing burnout, especially in retail where there’s a lot of churn,” he said.
“Reducing tedious manual tasks – late nights, early mornings, the end-of-month closures, all these things that stress people out. We see more and more companies talking about those people-centric benefits – because it’s a benefit to the individual, but it’s also a benefit to the business.”
