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The accountancy challenges that small retailers face

If you are a small retailer then getting your accounts right can be a bit of a headache. You can easily find yourself spending a significant percentage of your working day going over your financials, which is time that you could be spending on building your business and making more sales.

Small retailers have to deal with a range of issues, such as fluctuating stock costs, various taxes and, in some cases, international exchange rates. This means that they are often chasing a moving target when it comes to accounts.

The problem

Even those retailers that have the time and discipline to do their accounts on a daily basis can find it hard to interpret their financial records, making it difficult to produce the reports that they need to help them understand which products are profitable and which are losing them money. Retailers can even find it hard to use their accounts to see cash flow issues before they happen.

This is a big problem. If you don’t see cash flow problems looming, you cannot make the necessary adjustments to avoid them, which could include arranging a short-term loan, delaying stock purchases or maybe cutting work hours temporarily.

Customer returns and refunds also make retail accounts more complicated for small enterprises. The fact that you will periodically need to sell off old stock or hold sales adds another layer of difficulty to your financials. You will also need to record any stock losses that occur due to breakages or date issues, so that the amount can be included in your accounts. This data is the only way to get an accurate picture of your firm’s profitability.

It is also hard to keep track of all of the legislation surrounding, PAYE, NI, VAT, income tax, corporation tax, and import or export duties. This is a serious issue, because failure to comply with any of the legislation can easily result in prosecution, leading to heavy fines. This only has to happen once for a whole year’s profit to be wiped out in a single stroke, which can even end up putting you out of business.

What to do

The complexity of commercial accounts means that it is a challenge too far for a lot of small retailers. It is still a complex and time-consuming task even if you invest in software, because you still have to learn how to use it and actually find the time to key everything in accurately. As such, many choose to hire a firm that has experience in the small retailer sector to handle accounts instead.

Posted by Mark
March 27, 2015
Features

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