In July 2022, the British Retail Consortium reported the sharpest drop in customer spending since the COVID-19 pandemic while a Barclaycard survey revealed a 5% drop year-on-year in household goods spending.
These studies reveal that consumers are increasingly concerned about rising household bills and the cost-of-living. People are putting off big-ticket purchases and switching to cheaper brands and temporary fixes.
This is bad news for retailers as consumers altering non-essential spending behaviours (like meals out or going to the cinema). As business costs rise throughout the supply chain, retailers are struggling to avoid passing the burden on to customers with increased price tags and further impacting sales as a result.
With falling sales and rising prices in mind, our team of experts spoke to 250 people working in the retail sector to better understand how they are prioritising and managing business spend.
Our survey revealed that spend frequency remains high within every department of retail businesses, including IT, Legal, Operations, and in-store operations. Of the employees spending, 49% make purchases daily or weekly.
Despite how widespread, frequent, and time-consuming this spending is – 38% spend at least half a day every month processing payments – most retailers still rely on inefficient manual processes to manage expenses.
Just under half of those surveyed rely on corporate credit cards (which don’t allow managers to set spending limits). While 33% ask employees to pay out-of-pocket and then sort out reimbursements – which creates additional paperwork and can lead to resentment.
Both methods were more common than expense and spend management platforms, which are currently used by less than a third of those surveyed. Even in organisations with more than a thousand employees, where spend admin is multiplied, only 34% benefit from automated processes.
Manual processes can have a big impact on costs. Soldo estimates that European businesses lose £301b every year due to poor spend practices, including £34b of unclaimed VAT which is partly caused by receipt-processing errors.
And rising costs are set to impact employee expenses and business spending for retailers. 55% of the people we spoke to who work in office-based roles spend on procurement, 38% on travel and entertainment, and 34% on managing facilities. These are all areas affected by increases to fuel and energy prices.
With 36% of departments spending over £1000 every month, this could have a big impact on overall business spending. Evidently, it’s key for retailers to take control of their interdepartmental spending and identify where savings can be made.
Automated expense management platforms like Soldo help retail managers save time and effort, tackling the retail sector’s unique challenges. This is important at any time. But especially now, with rising inflation the spiralling cost of goods and staffing. Real-time control of spending will help identify potential areas for cost saving.
When it comes to managing spend, one of the key challenges for retail managers is the setup of their business workflows and team specific spend policies. Keeping track of expenses across different locations where teams rely on petty cash means finance teams can’t get complete visibility of spend.
This creates a labour intensive and time-consuming process at period end. And it leaves retailers without a clear picture of where their money is going, and finance teams focused on manual admin that adds little value.
With automated systems like Soldo, petty cash is replaced with pre-paid cards. The cards can be issued to each store location for shared purchases, so finance teams can keep track of every penny. This is essential if retailers want to identify savings.
Getting full visibility over spend is the first step to preventing uneconomical purchasing practices like duplicate subscriptions and making the most of bulk-order or shipping discounts.
Advanced card rules and team-specific budgets also prevent the risk of over-spending. Finance teams can also choose to pre-approve every purchase, particularly big-ticket purchases, avoiding last-minute questions and reimbursements to contend with.
The high staff turnover and shift work that are common features within the retail sector add further complication. When people move on to other roles, finance teams are left chasing up missing information or lost receipts. And if they can’t get complete spend data, that could leave retailers paying unnecessary VAT – an expense they can’t afford in difficult trading times.
This also leaves finance teams tied up with low-value manual work. But with automated systems, reconciliation takes minutes, not days. Full spend data is captured at the point of purchase, so there’s no chasing to be done at month-end. This frees up finance teams, so they can concentrate on more valuable work. Including in-depth data analysis and forecasting, which helps to secure better decisions and long-term growth.
UK retailers are facing a future of suppressed consumer spending and rapidly rising inflation. This is set to affect profits, so it’s key that they work hard to cut unnecessary spending and make the most of the funds they have available.
Automated expense management systems are a key step towards achieving this. They allow finance teams to get a complete picture of spending, identify savings, and keep a tight grip on every penny that is spent.
Automation also frees store managers up from time-consuming admin, allowing them to focus on more valuable responsibilities like customer experience.