Running a retail business in Singapore or the Philippines involves navigating a wide range of operating expenses (OpEx) to maintain profits. These OpEx can sometimes feel a little overwhelming, especially if the retail business is in an expensive area.
In this guide, we'll discuss common retail business expenses, the importance of managing them, and strategies for reducing them. We'll also explore the benefits of expense management software for helping retail businesses control costs.
Retail operating expenses are essential for a business to run on a day-to-day basis. These expenditures include rent, inventory costs, marketing, and employee payroll. They are unavoidable, so retail businesses must ensure they are workable within their cash flow without spiralling out of control.
Inventory is more complex than other operating expenses. Once sold, it becomes a cost of goods sold (COGS) expense, but before that, it is reported on balance sheets as a current asset. For example, inventory encompassing raw materials, transportation, delivery, storage, and manufacturing is more difficult to categorise than rent.
Operating expenses are indicative of the health and performance of your retail business. Due to their short-term nature, OpEx are relatively easy to fix. You can quickly reduce excessive electricity spending or invest more in marketing from one month to the next.
Operating expenses also affect profits. They are subtracted from revenue when calculating profit, so a higher OpEx indicates that your retail business must generate more revenue to turn a profit. The higher your operating expenses, the more likely your business will struggle to invest in growth opportunities and offer competitive pricing.
Effectively maintaining your operating costs offers your business numerous benefits. Profitability can improve, allowing you to reinvest in your operations, enhance customer experiences, and quickly adapt to market dynamics.
Here are some strategies to keep your retail store operating expenses down and drive up profits:
Excessive inventory levels will increase storage costs, while inadequate levels can harm sales and customer satisfaction. Striking the right balance will facilitate optimised operational costs. Management software can allow your team to track your inventory levels more accurately, monitor sales trends, and automate reordering processes. It will also allow you to conduct regular audits to identify discrepancies and provide you with data analytics to forecast demand accurately.
Integrating modern software systems can trim your operating systems by providing valuable data insights into stock levels and expand your reach beyond your physical storefront. Point-of-sale (POS) systems, CRM tools, and inventory management software will allow you to embrace online sales channels to reduce your dependence on physical stores and lower their associated overhead expenses. You can also use them to analyse customer behaviour and sales trends to identify areas for improvement.
Traditional payment processing methods often include transaction and interchange chees that could harm your profit margins. Therefore, diversifying your payment options with mobile wallets, contactless payments, and peer-to-peer platforms can reduce transaction fees and processing costs. Consider encouraging customers with cash payment discounts or negotiating with payment processors to secure lower transaction fees.
By improving relationships with your suppliers, you can negotiate advantageous terms like volume discounts or extended payment terms to reduce your procurement costs. The right vendor invoice management software should centralise all of your invoices, allowing you to automate routing and monitor approvals on an intuitive platform to cut manual errors such as duplicate entries.
Summit's Vendor Invoice Management and Employee Expense Management offer solutions to monthly retail operating expenses in centralised, intuitive software that will integrate into your existing accounting platforms like Xero. They generate real-time reporting to provide your accounting teams new insights into your OpEx spending patterns.
With Summit, you can get a bird's eye view of your operating expenses on a monthly, quarterly, or yearly basis to see which are costing you the most and areas that need greater investment. Summit takes guessing and estimates from your payment cycle insights while integrating with your accounting software and ERP systems for swifter book closure.
Summit is ISO27001 certified. It uses top-tier security measures to safeguard your financial data, including access controls, encryption, regular audits, and compliance with data protection regulations in Singapore and the Philippines. The digital audit trails it provides will reduce the risk of errors and non-compliance with government regulations and industry standards.
If you want to try Summit's expense management software to gain better control of your retail business' operating expenses, contact us to talk to one of our representatives. Our team will schedule a free demo and are always more than happy to answer any questions you have about our products. We can't wait to hear from you!