A Comprehensive Guide on Retail Accounting

What is Retail Accounting

Retail accounting is a unique inventory valuation and is more of an inventory management process than an accounting method. Under retail accounting, your accounting practice will estimate inventory value rather than calculate manually. You will also assume price changes, price rates across all units of the same item, and constant prices. Through these assumptions, you will make quick calculations, thus reducing the need for physical inventory counts.

In retail accounting tracking the inventory and figuring out its cost is challenging and to calculate the cost you will have to use one of the following methods which are:

• First In, First Out (FIFO): Under this costing method, you determine the cost of your first order by comparing it to the income your client have received and allocating that amount to the cost of products sold.
• Last In, First Out (LIFO): In this costing method, instead of matching the cost of the first goods sold, you match the cost of the last order goods sold.
• Weighted Average: If everything is mixed up then it will be difficult to calculate. In this situation you can choose to use weighted-average costing method by dividing the total cost of the products by the total number of products you purchased by your client.

Importance of Retail Accounting Service

Retail accounting services are crucial in helping retail business clients manage their financial affairs. Its importance for business clients is mentioned below.

Tax Compliance

You can adhere to tax regulations through retail accounting, ensuring accurate calculations, timely submissions, and compliance with tax laws.

Making Informed Decision-Making

Retail accounting provides valuable financial data and insights to enable your clients to make informed decisions. This includes identifying profitable product lines, optimising pricing strategies, and managing inventory effectively. Plus, through regular financial analysis, they can evaluate your performance and adjust to improve profitability.

Increase in Efficiency and Productivity

The use of advanced accounting software and technology has become quite common in retail accounting services offered by professional outsourced accounting service providers like Corient, leading to productive and efficient financial processes. Your accounting practice can focus on core activities by adopting the latest technology or outsourcing accounting functions to a service provider that uses the latest technology. It helps save time and resources that can be directed toward improving other accounting services.

Transparency

Accurate financial reporting and transparent financial practices will help in building trust with stakeholders, contributing to a positive reputation for your client’s businesses.

Benefits of Accounting Service for Retail Business Clients

Your accounting practice will be handling multiple transactions daily, and keeping all the accounting records will take time and effort. If you have a limited staff then paying attention to other important accounting activities becomes difficult. Hence, it will be wise to outsource accounting services for retail businesses to an outsourcing accounting service provider.

Latest Software Technology

In recent years, accounting software like QuickBooks and Xero have become quite popular because of convenience, accuracy, and cost-effectiveness. But you will be uninterested or incapable of buying or operating these software’s. Hence, you can use the accounting services of an accounting outsourcing service provider. These service providers not only conduct accounting through software technology but also have experienced accountants who can handle them.

Proper Record of All Financial Transactions

Numerous financial transactions take place under a retail business, like receipts, sales records, loan statements, and bank information, to name a few. By outsourcing retail accounting services to a service provider, your accounting practice will be able to maintain all financial records properly for your clients so that no issues crop up while filing tax returns. With financial records in your hand, you will be able to analyse and make future financial decisions related to your retail business.

Accounting Expertise

Many retailers try their hand at accounting operations, but only some succeed. The reason behind the lack of success is the need for accounting expertise. Plus, there is a chance of committing accounting mistakes that can lead to serious reputational crises. To avoid such a scenario, they appoint accounting practices like yours but chances are that you may lack in offering certain advanced accounting services. In that case, you can choose an accounting outsourcing firm to look after the accounts on your behalf through their experienced team of accountants. Thus, you can focus on improving and expanding your accounting practice.

Pocket Friendly

Handling accounts is a challenging task, you will have to hire an in-house accountant or a team of accountants depending on your client’s business scale, which will burden your budget. Rather than wasting your resources on creating an accountant team, you must use the services of an accounting outsourcing service provider. This will not only save money on new hiring but also on infrastructure that will be required for the new in-house staff.

Common Mistakes to Avoid in Retail Accounting

By getting retail accounting right, you will help your retail business clients to weather away the storm, thus giving them time to grow their business. To keep books in order, you must avoid the following mistakes.

Over-Reliance on Accounting Software

Currently, retail accounting is done through accounting software. While it has made life easier for businesses and accountant practices and increased the accuracy of numbers, overreliance on it can put you at risk, especially due to simple accounting errors.

Make sure to manually check the account books once in a while, especially while auditing. By doing regular audits, you can identify errors in accounting, if there are any, that the software has missed so that you can avoid committing costly mistakes.

Not Knowing Your Clients Financial Conditions

While it may look like a small mistake, not knowing your retail business’s client’s financial status can jeopardise you and your clients. To avoid being ignorant about the financial health, you must have a basic understanding of accounting and bookkeeping, whether you’re handling the accounting or not. When you have a basic knowledge of accounts, you will be able to understand the financial health of your client’s business and take corrective steps to rectify it.

Negligence in Maintaining Financial Records

Forgetting or overlooking to maintain and save financial records is a big mistake because it will cost your clients dearly. The only way to prevent this problem is to save and maintain the financial records regularly, especially during tax season when HMRC conducts surprise visits.

Future Trends in Retail Accounting

The only constant thing is change, and specific future trends will impact retail accounting. Customer expectations are influenced by trends leading to an increase in expectations. These expectations include increased innovation, personalised interaction, better customer experience, data protection, and proactive customer service.

Therefore, start investing in the latest technologies being adopted in the industry.

We are mentioning some of those new accounting trends that are changing the retail business completely.

Artificial Intelligence and Machine Learning

Automation is a reality in retail accounting functions like invoicing, which helps reduce accountant’s workloads. Machine learning is taking substantial data sets and recognising patterns and trends by applying numerous analyses. This process helps retail accountants identify frauds, financial fluctuations, and forecasting.

But if you think automation will remove human involvement in accounting, then you are wrong. AI and ML will need human hands to control and review the results. These technologies help reduce an accountant’s workload and increase efficiency and turnaround time.

Cloud Computing

Cloud computing offers multiple benefits in the accounting process, from real-time financial updates to cost savings. The adoption of this method has quickened the accounting process and is making financial and other reports more comprehensive

Accounting Software’s

Accounting software like Xero, Sage, and QuickBooks are quite popular and used by major accounting outsourcing service providers. Either you can buy the software or you can outsource accounting to a service provider that uses them.

Accounting Outsourcing

Outsourced retail accounting has become the newest trend among accounting practices because of the benefits it offers, and that to at a lower cost. Without outsourcing services, you will have to build an in-house accountant team, and apart from monthly salaries, you will have to pay for medical insurance, payroll taxes, retirement plans, other employee benefits, and perks.

Through outsourcing, you can save costs, get expert help, and have flexibility in services per your requirements.

Conclusion

This blog covers retail accounting, its importance, benefits, common mistakes, and future trends to watch. This blog will help you improve your understanding and the way you do retail accounting, thus improving the retail accounting services offered by your accounting practice.

However, if implementation is an issue for your accounting practice, then you can explore the option of using the outsource retail accounting services of Corient, which is a professional accounting service provider based in the UK. We can have gained considerable experience in offering top-class retail accounting services to multiple accounting practices which has streamlined their performance. Contact us via our website form, and our team will reach out to discuss your requirements promptly. We are eagerly looking forward for a sustainable long-term partnership.