Farms and Estates – Financial Management for Retail Enterprises

In a previous article Business Advisory directors Jack Deal and Ryan Pearcy delved into the complexities of estate management and the issues business owners face when contemplating how to manage people, processes and systems. Many estates now include retail businesses, for example farm shops or cafes/restaurants, and these often require different systems and processes to the core business. In this article we look at some of the financial management issues facing farm retail businesses and how modern technology can help resolve these effectively.

The issues

Farm shops and café/restaurants often complement existing estate activities. They frequently arise from opportunity and, as a result, controls and processes tend to follow, rather than being designed at the outset. Utilising the right systems can make the retail side an effective way to generate additional income without costing an arm and a leg.

Most retail businesses have a till system. Traditionally these were separate isolated systems with no connection to the business’s finance system, meaning all takings had to be manually copied from the till system into the finance system. This way of reconciling takings is so ingrained that HMRC accepts the copying of information from daily till printouts into finance software as a caveat to Making Tax Digital (MTD) compliance. Although this may mean you have an “out” for this aspect of reporting it doesn’t remove the financial admin burden. Not only does the information on the daily takings need to go on to the finance system but this needs to be reconciled against the many different payment methods as they come into the bank, which often don’t tie up. A smart integrated system automatically posts transactions in a way that enables one click reconciliation.

Card payments have become the number one method of paying for goods – a development which has accelerated during the pandemic. Whereas once cash was king, now it is the digital wallet, with more and more retailers choosing to not accept cash payments any more. This has the benefit of reducing the risk of fraud from theft as well as making the retail team more efficient by removing the need to manually “cash up” at the end of a day and deposit the funds. It doesn’t remove the risk of error though. Most card payment terminals are not connected to a till which means the value needs to be entered manually. This inevitably brings errors that end up as a cost to the business. In addition, the methods of payment are expanding with mobile and smartwatch payment and new open banking payment facilities which are far cheaper. To ensure an automated process you would need a modern card payment terminal that integrates into your till system.

Traditional farm sales are completed in bulk, so keeping the financial system updated with stock-in-hand values can be an infrequent process. Retail operates much faster with small quantities of items sold at irregular intervals which then require replenishing to meet future demand. Both areas come with a risk of fraud and if the stock management process is not robust and timely, there is no deterrent to stop people abusing the system. In a retail environment it is impossible to lock all stock down, so the most effective deterrent is an electronic point of sales (EPOS) system that is easy to track and report stockholding against sales without creating an unwarranted burden on staff. Most modern till systems will have stock management built in that reduces stock on sale and adds it on purchase.

A successful store maximises profit on goods that are in demand whilst selling off other stock quickly at a reasonable margin to generate space. Physical stores enhance this further by creating a layout and pricing structure that brings customers into the store with value-priced products, sucking customers into the back of the store and then funnelling them past desirable premium products, all with clever product placement. This is only possible with insights on the products themselves, including turnaround time and margins. This is further complicated with perishable goods which are often a key selling area for farm shops. To generate these insights, systems need to not only facilitate stock tracking, but have dashboards and reporting functionality. The best systems have APIs that enable key sales information to be extracted and pooled into other external dashboards that can be linked to other metrics such as weather and staff management systems (to enable links to be drawn between sales and staff members).

Is there a solution?

There are many till systems that have stock tracking, but it is the newer cloud-based till systems that have the greatest functionality. Given the rural location of most farm shops and the severe operational restrictions from down time in the retail space, installing a cloud based till system has to be weighed up against connectivity restraints. Some of the best cloud system have “Edge” architecture that enables the tills to continue operating if internet connectivity is weak or lost completely.

So how do they work?

The best systems in this space work on tablet devices, with easy-to-use imagery-based interfaces. Combining this with hardware such as cash drawers and holders enables staff to serve from a single location or roaming in the store. These are linked to payment devices via Bluetooth and wi-fi so that as the total is rung through the till, the payment value appears on the payment terminal. This prevents errors in processing as well as supporting multiple payment types. Stock values are updated in real time and can be synced across multiple locations or till points, which may be appropriate depending on the size of the store. Sales and stock information is then updated into the finance system daily to sync with payment deposits from the payment gateways, enabling one click reconciliations as well as compliance with Making Tax Digital digital links. Dashboards are always available for management to see what is occurring in real time in their shops, cafes and restaurants from any location.

In conclusion

All of this is possible when you select the most appropriate system for your needs and configure it in the right way. When sales are processed automatically the finance team can then focus on expense management as well as assessing what is and isn’t successful in your retail premises. But with any system change comes the challenge of change management and the impact on the team. Processes will need to be adapted, training tailored and support secured. Getting this right can transform how you and your team work, and enable you to use your resources more productively.