The past year has presented many challenges for businesses, pushing organizations to rapidly pivot their processes and operations in order to stay afloat. In fact, some economists estimate that it might take several years until global economies are back to pre-Covid-19 growth models. However, for those companies in the e-commerce space, business was booming.

“Consumers spent $861.12 billion online with U.S. retailers in 2020, up 44.0% from $598.02 billion in 2019, according to the latest analysis.  Online spending represented 21.3% of total retail sales last year, compared with 15.8% the prior year.”  – Digital Commerce 360

That growth was not without challenges; many companies were trying to expand or establish their footprint online, while others were just trying to figure out how to complete their first remote financial close. After hearing from prospects and customers alike, here are five best practices that we learned.

Best Practice #1: Identify a Business Process for Those Not Yet Online

A business previously marketed its products in a hybrid model. In an effort to pivot to unprecedented circumstances, they wanted to add a new online business line. Selling directly online was new territory for them, but taking the leap to e-commerce was a critical business decision.

In order to optimize the financial close, start off by understanding the data sources you’re working with. Executing an effective financial and business process that works together achieves a positive return on investment.

Any successful e-commerce business process should include reconciling orders, whether from Amazon or Shopify; to your merchants such as PayPal, Stripe, or Square; or payment scheduling merchants like Afterpay or Affirm. From there, the next logical step is to reconcile your merchant vendor statements to your bank statements to ensure you have received the required funds. Oftentimes, this involves reconciling with a considerable amount of data.

With a financial automation solution in place, you can effectively maximize visibility throughout the entire process.

Best Practice #2: Organize Data Sources, Load Data Frequently, and Automatically Reconcile

Brick-and-mortar retailers needed to pivot in order to pull in revenue. One large retailer was facing challenges as the vast majority of the sales turned exclusively online. They were unable to keep up with the volume of manual reconciliations, causing them significant time spent during the process as well as potentially having to write off balances they couldn’t properly research.

By identifying and organizing their data more effectively, the retailer was able to switch from performing reconciliations on a monthly basis to implementing a process in which they loaded their data daily, decreasing the amount of volume of each import.

An effective matching solution triggers automatic reconciliation when all sources of data are loaded.  This allows the retailer the flexibility to drop files through an automated file transfer method and start reconciliations without even having to enter the application. Financial automation improved their efficiency and effectiveness, while subsequently improving the match rate and reducing the monthly time spent reconciling.

Best Practice #3: Identify Variances for Merchant Fees

Each e-commerce service out there takes a cut of business revenue along the way. As most of you know, it isn’t the easiest to know exactly what you owe them or how much of your money they are holding back as a reserve. A lot of times, you just get an invoice from them which initiates your journals to record the expense. Taking control of these fees is much more beneficial than taking the loss on the invoice. An automated solution empowers businesses to stay on top of merchant fees and understand exactly how much is owed to merchants.

 

By automating their previously manual reconciliations while creating a split (or variance) transaction for fees, retailers can reap significant time savings with a streamlined reconciliation process. Each day, businesses can export that amount, record the daily fees for the merchant vendor, and have the backup required to make the entry. After the entry is made, retailers can load back the transactions into a matching solution and clear off the unreconciled amount.

Organizations now have a record of daily fees in their matched items screen in case they needed to go back and view historical data. Implementing an automated matching solution solves significant financial complexities businesses face prior to working with financial automation software.

Best Practice #4: Create Custom Exports to Clear Outstanding Checks or Open Items from ERP

Of all of the frustrating business practices many accountants face, the clearing of open items and outstanding checks may top them all. Scouring through statements and manually checking off and clearing the items in your ERP slows down your month-end processes, causing potential errors in your reconciliations.

The move from cash-based to online payments creates significant, additional volumes of transactions for retailers. Once implementing a financial automation solution, organizations can further improve their processes by configuring an export of matched items, specifically those from the bank with a check number. By isolating those transactions, exporting them from Microsoft Excel, and loading them directly into the customer’s ERP to clear the outstanding checks, retailers can close their books faster than ever before.

Best Practice #5: Perform 3-Way Matching to Identify Variances

How many of us have recently discovered food delivery services? Services such as DoorDash, Uber Eats, Grubhub, Postmates, Deliveroo, and more exponentially grew in the past year. While these services were great for us as consumers, they created a lot of new complexities for restaurants.

Before delivery services were a necessity for businesses, reconciliations consisted of comparing POS to credit card statements to bank statements. With this, reconciliations between the POS and the delivery services became vitally important. Down the line, reconciling the delivery service transactions with your bank statement becomes another complexity.

By implementing a three-way match scenario that enables businesses to reconcile their POS sales to their credit card and delivery service vendors in the same reconciliation, organizations can effectively streamline this previously complex process. After transactions match, the matched transactions are taken and summed to match the daily bank deposit, regardless of source. Empowering businesses to identify any variances and take control of the matching process enables them to drastically optimize their close and stay on top of their finances.

Every retailer has different challenges; while no set of best practices can be implemented altogether, these may provide some insight into common challenges faced by other businesses. Most of these best practices take a change in process or training or software in order to be successful. Discover the benefits that Adra by Trintech can bring to your retail Office of Finance.

Written by: Jon Sykora