Merranti was approached by a London high street single shop retailer who had suffered a downturn in their business figures over the last six months. The sales figures had decreased over the previous two quarters, and the reasons were not as apparent as first glance.
We were requested to review the company sales and cash flow accounting figures to ascertain if a reason could be found for the reduction in sales figures which was affecting the profit and loss.
Initially, we created management accounts for the same quarters as the client and reviewed the business accounts over the last three years and found the situation worse. There had been a small decline over the whole sales period that the client had not realised.
From detailed management account analysis, we reviewed the market. We moved the quarter measure in line with competitor sales programmes. It was realised that the company had maintained its sales programmes and timings from the last 20 years. Competitors had moved them in line with seasonal purchases. It resulted in the client launching sales campaigns always after competitors.
The client then used the management accounting analysis to readjust the sales periods resulting in healthy sales figures increase.
The key element here was creating a set of management accounts does not always give the answers; it’s the experienced analysis of the financials that gave the answer by seeing a new pattern in the numbers.
Having instant access to financial accounting data in a retail environment in this market is imperative and analysing this information from a different perspective can reveal surprising results.
We have now set up a programme for the client where they get snapshot management accounts weekly, or as they request, so they can compare and review in a short time. This allowed them to make informed business decisions instantly.