Retail Revenue Assurance

Finally you have it made, products are flying off the shelves, customers love you, your suppliers are on point..looks like you hit the lotto, cracked the holy grail of retail.

But pause…”is your money complete?”

The reality is once you have more than one store, you cannot be in every store  all the time. You need to rely on employees to carry out critical processes in each store on a daily basis. Including handling sales and funds.

Funds come into a retail store from customers either via cash or card payments. Cash should be deposited into the bank same day or next day. Card payment should find its way in full (less the usual bank commissions) to the retailers bank account the next day. Basically all monies should end up in the operational bank account in one form or the other latest by the next working day.

How do you as a retailer ensure that this flow of funds from your customer to your bank account is not disrupted? Both cash and card payments? On a consistent basis?

How do you ensure that your staff do not pocket cash sales? or post cash sales as card sales and pocket the cash? How do you ensure that your Bank does not refuse/forget/neglect to credit your account with the value of card transactions done on your terminal by your customers?

Note that leakages of this nature will not show up as a loss in your income statement if not tracked. A retailer could be showing profit all year round and still be unable to pay its bills. Slow Silent Killer.

To solve this retail problem XlevelRetail introduced the concept of Retail Revenue Assurance (RRA). A system of RRA ensures that all monies earned by a retailer across all it’s branches and channels end up completely in the retailer’s bank account in a timely fashion.

We will use this write up to illustrate the concept in our usual simplified step by step manner.

Step One –  The Retail Management System

The first step in a RRA process is to implement a centralised Retail Management  System (RMS).  This system  will ensure that you or your account staff in the head office have total insight into sales operations at the branch as it is happening or at periodic intervals during the trading day.

By the end of the day the RMS should be able to tell you the total value of sales in all your locations broken down into cash and card payments on a branch by branch basis . You should be getting this data independent of the shop floor staff, and this data should flow to you regardless of where you and/or the accounts staff are located

Setting up a system like this is critical to the effective running of a functional revenue assurance program. If you have a challenge setting this up, you should contact a retail systems expert.

Step Two – Compare Data from the RMS with Bank Statement 

Someone  (independent of the shop floor staff ) then compares the funds flow reports from the RMS with the actual deposits/entries in the bank account.

  1. Confirm that the cash deposited in the bank by each branch is equal to the cash sales as indicated by the Retail Management System for the branches.
  2. Confirm that the PoS transfers to your account by your bank is equal to the card sales as indicated by the Retail Management System for each branch less PoS Commissions (the commissions should be between 0.25% and 1.25% depending on your business type, bank and negotiation skills)

We recommend that retailers do not rely on “bank deposit tellers” to carry out this comparison, use the actual bank statement, too many instances of fake deposit tellers abound.

Step Three – Use Your Accounting System for Confirmation

Here it gets a bit complicated. As a busy retailer, you need to be sure that the functions in Step two is being carried out efficiently on a daily basis. We have cases where this process was instituted but not executed by the responsible staff.

To have this assurance you need to include a bit of accounting in your system. You need to set up an accounting system that is able to accept data from your RMS (or is integrated with your Retail Management System ).

Within the accounting system, you need to set up two suspense accounts, a Cash suspense account and a Card suspense account.

Your Retail management System should automatically carry out the following in your accounting system

  1. Debit the Cash suspense account with total cash received for each branch on a daily basis
  2. Debit the  Card suspense account with total card payment received for each branch on a daily basis

You or your account account staff will on  a daily basis

  1. Credit the cash suspense account with total cash for each branch on a daily basis, Debit bank account as the contra
  2. Credit your card suspense account with total card for each branch on a daily basis, debit bank account as the contra

If all transactions are properly done, both the Cash and card suspense accounts will be zero at the end of the posting of each day’s transaction. Zero on the suspense accounts means

  1. All cash and card transactions are properly accounted for
  2. Your accounting team (or you) has done the right posting

If non zero, then you probably have issues with missing funds or non posting by you or your team.

On a regular basis (weekly/Monthly) the accounting bank ledger account should be reconciled with the actual bank statement to totally close the loop.


Last Word – The “Infallible” Banking system

Reality check, your bank will make mistakes. We have quite a number of clients who never bothered to keep track of or reconcile their PoS card transactions because they believe the bank will always settle.

We are sorry to disappoint you but as far as settlement of card transactions is concerned, the banks and the settlement institutions have only a 99% accuracy rate, that sounds impressive till you realise that this is equal to a 1% failure rate or 1 in 100 transactions are settled wrongly. If you do not catch and resolve this, this could equate to 10% of your net margins lost.

Or, because your shop floor staff know you do not properly assure your card transactions, they post cash transactions as card. The retail system will report a lesser cash on hand by end of day. The staff will deposit the cash as reported by the RMS and they pocket the rest. You are non the wiser, simply because you focus on cash payments only.

No one is infallible, not your staff, not the bank, not you. That is why a complete system of Revenue Assurance MUST be in place in any retail organisation, especially a multi location retail business.

If all we have written above sounds interesting but confusing at the same time, you know what to in a retail management systems specialist, preferably XLevelRetail.


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