Leveraging Your COVID Pivots to Drive Future Growth

While the pandemic drove a sharp increase in online sales, it also affected critical supply chains across industries, and nowhere was that more apparent than the grocery business. Both wholesalers and retailers alike found the usually straightforward practice of tracking and maintaining inventory turn into just trying to get the inventory.

In the grocery industry, this planning is driven by the cost of keeping inventory, shelf life, seasonality and consumer demand – dare we even think of toilet paper? In 2020, the risk of many products not selling virtually disappeared when lockdown behaviors drove panic buying. Instead, grocers were suddenly faced with product shortages and shipping delays, forcing them to shift their business strategies. Sound inventory planning, which should always be closely integrated with financial planning, became paramount as many grocers learned to let accounting more closely steer that planning and grow profitability.

Historically, inventory and sales planning have been based on seasonal trends, but that predictability disappeared once millions worldwide were stuck at home experimenting with sourdough starter. Suddenly, everything seemed to be in continual high demand and short supply. Additionally, online grocery shopping exploded as a solid revenue source, filling a critical need during lockdowns, but evolving to the new standard for many after. Here, too, supply chain shortages had an impact, whether it be from shortages or from delayed delivery – it was impossible to predict lead times.

Grocers that did well were those that maintained predictable inventory, while also juggling the demands of the pandemic on labor and both employee and customer safety. Now that the industry has had a moment to catch its breath, grocers would benefit from taking a close look at their inventory and financial planning to have greater visibility into the business financials. This kind of modeling based on data can help retailers understand sustainability, especially in stressful markets to come.

Automate Accounting With the Right Tool

First and foremost, grocers should automate accounting with the proper software to get more accurate information. The right system will depend on the size of the grocer, group or chain, and the complexity of the sales channel mix – is it brick and mortar, exclusively online, or a combination of both? A team will need to know how to implement the tool and connect it with others to get the most accurate information and make the right decisions.

Know What is Making Money

Accounting tools can also help grocers know whether they’re underpricing products or to identify their top product. A grocer may not have a clear understanding of what its most profitable or highest-selling product is, or even its best-sellers that maintain consistent and strong demand. But if they do know these, then management can consider adding some fair margin, especially when the market allows, like in 2020.

Know Where the Money is Made

Further to understanding top products, accounting can help grocers gain visibility into profitability by sales or service. Depending on the system being used, accounting can capture data in a way that allows management to have clear line of sight into what channel is performing the best and making the most profit, guiding sales strategies accordingly. Smart retailers shifted to online and curbside because of the pandemic, while others shifted by adding services like delivery.

Ask the Experts

It can be tricky to dedicate the brainpower to ask and address some of these deeper questions, especially in the midst of a historic boom and the high demands of marketing a store or stores. Many may have just one person dedicated to the task, creating a potential single point of failure. Conversely, a built-out internal accounting operation may require more headcount than a grocery business can afford. Tapping outside expertise like a fractional accounting team for either a temporary financial house cleaning or for a long-term engagement can introduce the right thinking and predictability – freeing time and increasing profitability. Incentivized to find the best solutions, these teams can dig deeper to identify and help establish best practices to help grocers achieve numbers that support any environment.

As the world works to return to normal, the pandemic boom doesn’t show any sign of abating. Rather than hold their breath to see what’s next, smart business managers can plan today so that their future financial plans check out.