ACCOUNTING FOR ONESELF

MARC MILLSTEIN

Software programs for analyzing financial trends -- from budgets to gross margins -- are moving from the realm of quarterly corporate accounting to the store level, where they are serving as vital tools to enhance bottom-line results.

By placing software tools capable of analyzing a wide range of financial parameters, often on a weekly basis, in the hands of store-level managers, retailers are increasingly spotting key sales and expense trends much earlier in the business cycle.

The result is an enhanced ability

to take quicker action to resolve potentially serious problems and increase store-level efficiency as well as bottom-line profits.

"We are rethinking our traditional accounting [practices], which have been based on quarters. Our operational people need to get [financial] information on a weekly basis, so they can be proactive during the quarter rather than waiting to review information after the fact," said Sandy Sadley, controller at ShopRite of Pennington, Trenton, N.J.

"We now have what we call retail accounting systems in every department in our stores. They are an intricate part of our in-store program," Sadley said.

Bob Mayber, operations director at Sixth Street Food Stores, North Platte, Neb., called the use of store-level financial tools a major component in the chain's quest to control costs.

"Correctly forecasting sales is the key to expense control. From an operations standpoint, that is why these financial tools are becoming so important. We don't budget from the top down anymore; we budget from the bottom up. Our store managers are responsible for their own budgets," Mayber said.

Carlo Ruffolo, controller of corporate services at National Grocers, Toronto, also stressed the need for retailers to make greater use of the expanding array of financial analysis tools now available.

"We are starting to look at putting financial tools into the hands of store managers so they can react more quickly to how the business is going. We want them to be able to pull up their own gross profit figures and profit-and-loss statements, and to be hooked up with our central office," he said.

The drive to equip store-level managers with more detailed financial analysis software programs comes at a time when all retailers and wholesalers are seeking ways to streamline operations and cut costs by improving productivity.

It is also a further sign of the industry's growing determination to make use of an expanding array of software tools at all levels of retailing.

According to retailers and wholesalers, the greatest benefits from implementing store-level financial programs involve:

Margins and Sales: The new software programs are enabling store-level managers to identify unanticipated sales and gross margin trends each week and take steps to address problems much more quickly.

Labor Scheduling: By understanding sales trends sooner, retailers can make more precise adjustments to staffing levels, thus improving service levels and labor scheduling efficiency.

Pilferage: One prime benefit of enabling store-level managers to analyze financial trends on a weekly basis is the ability to spot pilferage problems much earlier and thus stop the hemorrhaging of funds.

At ShopRite of Pennington, store-level managers now use a software program to track actual sales and expenses vs. the projected budget lines on a weekly basis.

"We are very aware of having to be proactive rather than reactive. We are living in such a fast changing, competitive environment, and we need to get financial reports turned around as quickly as possible," Sadley said.

"We are anticipating our gross profits down to each item. We are looking at these variables at the end of each week and saying, 'Projected, we should have generated X number of dollars and X percent gross profits,' and then looking to see if we did, and if we didn't, why didn't we, and what should we do about it," she said.

The five-supermarket operation is also using the system to help track over-and-short totals as far down as the cash register level. "We are looking at all aspects of potential loss within the company. We are monitoring the [register totals] daily and weekly and seeing whether they are $10 over or $5 under or whatever. We track that on a weekly or daily basis, and it is helping us control shrink," Sadley said.

James Bulkowski, supervisor of financial systems support at Spartan Stores, Grand Rapids, Mich., said one of the driving forces in the industry now -- the need for integrated systems with nearly real-time analysis and reporting capabilities -- is propelling wholesalers and independent retailers to explore more advanced financial software tools.

"One of the things we are looking into is being able to pull up a financial statement at the drop of a hat. That is one of the hot buttons in the eyes of financial officers," he said.

The need to acquire information faster extends to nearly all financial applications, both at the corporate and retail store levels, Bulkowski said.

"Our objective is to find a system that will provide us with this functionality. If we can't, then we will have to look at developing it ourselves, because the need is there.

"Our top management has said many times they expect, and rightfully so, to have this type of information available. They feel it will allow [wholesalers and retailers] to make decisions more quickly rather than having to wait two to three weeks to get information," he said.

At Sixth Street Food Stores, a 12-store chain, a financial analysis program is now being used to forecast future department and store sales vs. predicted budget and to set more precise staffing levels.

"The program takes historical data, crunches the numbers, and does forecasting. The ease and accuracy of the system is what we are high on. It is to the point where the sales forecasts for the quarter, as a company, are off less than one half of 1%," Mayber said.

Based on the sales predictions, store managers can ensure optimal staffing levels. They can also precisely track expenses and thus be valuable in achieving bottom-line margin goals and carrying out pricing strategies.

"Each week the store manager, using the system, gives the department managers projections on sales and a corresponding budget for [labor] for the following week. It allows managers to make changes quickly if the service level is inadequate or if the stores are overstaffed," Mayber said.

"The other side of the coin is that if we are determined to be the price leader in the market, we are going to have to adjust our expenses accordingly to maintain our profits. This system allows us to track those expenses and make changes quickly," he said.