Significance of Financial and Commercial Planning in Retail: YRC Insights

Financial and commercial planning helps retail brands manage current resources and prepare for future needs and contingencies.

Financial and commercial planning not only allows retail brands and businesses ( https://www.yourretailcoach.ae/services/business-strategy-consulting/ ) to effectively manage their financial resources for the present but also prepares them to appropriately deal with future requirements and contingencies.

In this communiqué, the team of business plan experts of retail and eCommerce consulting firm ( https://www.yourretailcoach.ae/ ) - Your Retail Coach (YRC) highlights the significance of financial and commercial planning in retail with an accent on the Middle East region.

Retail Cash Flow Management

Having a grip over the incoming and outgoing cash revenue is critical for retail brands and businesses to maintain a healthy retail working capital management situation. For example, all routine operating expenditure heads like wages and salaries, utility bills, and inventory procurement are not made from deposits and reserve funds; these are covered from running cash like using water from a flowing river. Making projections of income/revenue and costs is an unavoidable aspect of financial and commercial planning. It directs businesses to take into account how much cash is expected to come in and how much of it will be going out.

Implications on Inventory Procurement, Payment, and Budgets

When inventory is procured, the payment for the same must be made within the agreed deadlines. The credit period may vary but the payment must be made on time that has been agreed in advance. Retailers need to ensure that sufficient cash is always available on time for making these payments.
Without due planning and deliberation on intended inventory purchases, time of purchasing, cost of goods, inventory turnover, and demand projections, aligning inventory objectives and requirements with financial resources gets extremely challenging.

With more than 10 years of experience in delivering retail budgeting & forecasting solutions, YRC maintains that having a vision and plan for inventory investments is of big help in maintaining budgetary discipline and financial due diligence in retail. Having a well-planned inventory budget and purchase plan is often a part of diverse retail cost reduction strategies.

True Picture of Profitability

Calculating profitability or arriving at profit and loss figures in a retail business ( https://www.yourretailcoach.ae/services/business-strategy-consulting/ ) is not that simple. To begin with, cost structures are diverse in retail. For example, COGS is a derivative of many fixed and variable elements like the purchase price of goods, freight or shipping charges, taxes and duties, cost of holding and carrying inventory, shrinkage, etc. Secondly, there are indirect costs as well like rent or leasing charges, utility bills, wages and salaries, advertising and promotion expenditures, costs of maintaining IT systems, returns and refunds, etc. Thirdly, the variations in inventory valuation methods for different types of products make the determination of COGS even more complex. Having a proper set of rules and regulations for making different financial and commercial assessments, including profitability, serves as a big help in gauging the performance of a retail enterprise in a numerical sense.

Creation of Funds and Reserves

A retail enterprise needs funds and reserves for a wide range of reasons like funding growth and expansion, asset replacement, modernisation, adopting digital transformation, upgrading technological infrastructure, etc. Now the financial resources required to give effect to these changes must come from somewhere. Having funds and reserves reduces the dependency on external funding which usually comes at higher costs. Proper financial and commercial planning necessitates that retailers make provisions for the creation and sustenance of funds and reserves dedicated to different purposes. The creation of funds and reserves is a crucial element of retail capital expenditure planning.

YourRetailCoach
+91 98604 26700
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To converse directly with a retail business plan expert, please visit YRC's official website: https://www.yourretailcoach.ae/

This release was published on openPR.