Petrol retailing is fundamentally a high-turnover, low-margin business. It isn’t unique in that respect, of course, but it is somewhat unusual in that the major component of that turnover (fuel in case anyone has forgotten) is subject to almost daily price volatility and in the short term that includes the possibility of the price dropping. As with every other business, success depends on a combination of factors: demand, correct pricing, cost control and cash flow management being the key ones.
However, in a high-turnover/low-margin operation, if any of these factors are out the overall effects tend to be magnified quite significantly and very quickly. So this sort of business in particular needs timely, up-to-date and accurate financial information to identify whether they’re getting it right and to correct things immediately if they’re not.
Now there’ll be some operators reading this who’s immediate response might be that with all of the automation on-site, coupled with a cloud-based accounting application, they don’t have to wait any time at all to see their financial picture everything is available in real-time, at the touch of a button or the click of a mouse.
That’s true in theory. But years of experience and talking to site owners/operators suggests that in practice things don’t quite work out that way. Today’s technology is brilliant. It could be used to produce perfect and instant financial reporting (well, almost). Paradoxically perhaps, that would require using it in a slightly old-fashioned way. That means having an experienced book-keeper/accountant collating and reconciling all of the data within the accounting application daily, for example; having frequent audits of basic data at site level stock and cash in particular to make sure that the data going into the system is actually real and accurate. The site owner would need to sit down and review the results with the same people who’ve produced and checked the information. Unfortunately many site owners see that as an expensive option.
Bad habits
The technology tends to be used for convenience and a saving of admin costs and some bad habits creep in: site owners who rarely visit their sites in person, because they can ’see’ all of the activity on-screen; no auditors sent out to sites to spot check whether the cash or stock reported by the management system is actually in the tills, shop or store room; and a book-keeper who only gets a day or two at the end of the month to try and reconcile maybe several hundred bank transactions coming through automated bank feeds into the accounting application against a similar number of sales, purchase and credit transactions generated by the on-site pos. Left to go on like that for a while, the resulting output can be pretty useless: unproven, virtual figures bearing little resemblance to reality. And if there’s one thing worse than having no financial management information, it’s having completely wrong information. That may sound like an extreme scenario, and in fairness most site owners still utilise accountants and book-keepers at least to the extent of producing regular, reconciled accounting information.
At the other end of the scale, there are site owners who’ll sometimes privately admit to a different problem potentially they have access to so much information, so many reports that they don’t have the time to digest, let alone act on it. Volume trends, margin history, aged receivables, sales against forecast etc and much more. It used to be called ’information overload’. The answer to that problem is again ’people’. You need someone who’s familiar enough with your business but objective enough to be able to see the wood for the trees and help you focus on the most important information.
brilliant tool
As we said earlier, today’s technology can be a brilliant tool for producing the accurate and (almost) instant management information that petrol retailing businesses in particular require, but too often it’s been implemented in the same way as the quest for the ’paperless office’ simply eliminating what are seen as overheads and increasing the quantity of output rather than improving quality.
Used properly, the technology can give you much better understanding of the state of your business but that requires some human help.
If you think that maybe you’re seeing inaccurate information, or don’t know which information you should really be looking at or what it means, start by having a chat with your accountant and if they can’t help, you know who to call next.
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