Every business, regardless of size or industry, is responsible for its own accounting to supply the financial information that regulators require, and to keep tabs on performance and growth.
Small retail stores face several special accounting challenges, both in the form of a complex business, and limited resources to devote to the accounting process.
Accounting software is among the most convenient and cost effective way for a small retail shop to manage its accounting in-house. Software packages that meet the basic needs of a small retailer sell for anywhere from $300 to more than $1,000 per year (with subscriptions normally payable monthly).
These programs allow owners, as well as managers with authorisation, to log in, record transactions and manage payroll, sales and inventory tracking and operating expenses. Accounting software for a small retailer can run on most conventional computers and in fact generally runs on the cloud, so hardware requirements are minimal. Softwares such as Kounta, Vend and Shopify are commonly used in retail.
Keeping records of financial transactions outside of an accounting software program is also essential. A small retailer needs a method to keep receipts, sales records, loan statements, bank information and past tax data.
This includes information that a retailer doesn’t need to enter into an accounting software program immediately, as well as information that will be necessary if data stored on the computer is lost. Software such as receipt bank is commonly used for this purpose.
Every retailer needs a method for counting physical inventory in the store. This is because accounting relies on accurate data for the value of inventory, which is classified as an asset. Inventory information also confirms sales data and determines how much the retailer can write off as a loss from damage or theft.
Some small retailers choose to take physical inventory counts while the store is closed. Others employ cycle counting, which uses an ongoing system to count the inventory for various aisles, shelves and storage areas on a regular basis. Whichever method the owner chooses, a small retailer must follow a consistent method for inventory accounting.
Managing accounting, even for a small retailer, requires someone with the right knowledge and skills to manage the process. Small retailers are likely to employ people who have expertise in the goods they sell, especially in the case of specialty shops where an owner’s passion is a key attraction for customers.
However it is necessary that small retailers ‘employ’ a qualified accountant to help them get their books in order and handle annual income taxes as well as ongoing financial responsibilities associated with the store