To ensure a merchant’s monthly performance is recorded accurately, retail brands’ finance teams carry out a process known as “month-end financial reconciliation.” Previously, the month-end financial reconciliation process for retail brands included only retail sales auditing. But with the rise of eCommerce, both in-store and eCommerce sales must be audited to capture omnichannel revenue accurately. Shopify merchants constantly strive to optimize their Shopify sales audit process to prevent losses due to unreported revenue.
The auditing process becomes more complex for omnichannel merchants because they fulfill orders across multiple sales channels, including physical stores, Shopify eCommerce, Amazon, Instagram, etc. Auditing sales for each of these channels can be a daunting task. Shopify merchants leverage Order Management Systems (OMS) to synchronize inventory across channels and update cross-channel data in real-time, fulfilling orders as long as inventory is available at one channel and thus reducing overselling or underselling.
How does this work exactly? The OMS downloads online orders from a merchant’s eCommerce platform and routes them to the optimal fulfillment location. Once the orders are shipped, they are marked as “completed” in the OMS, the payment is authorized, and they are recorded as sales.
At the end of each day, online and in-store sales are pushed from the Order Management System to the accounting system for general ledger postings. The sales data flows from POS/eCommerce to OMS to the accounting system. If there are any discrepancies in the sales data of the POS/eCommerce, OMS, or the accounting system, the monthly sales totals for POS/eCommerce will not match with the accounting system, causing the finance team to spend additional hours discovering the cause of the inconsistency.
In this blog, we will discuss why the omnichannel retail sales audit process is essential, its key challenges, and how Shopify merchants can close out the month more efficiently.
Why is the Omnichannel Retail Sales Audit Process Important?
By the end of each day, POS and eCommerce sales should be pushed to the accounting system for general ledger posting. At the end of each month, the finance team audits in-store sales by matching monthly total sales of POS with monthly total in-store sales recorded in the accounting system. Similarly, the finance team also audits eCommerce sales by matching the total monthly sales of the eCommerce system with the total monthly online sales recorded in the accounting system.
Any errors in the total monthly sales figures raise a red flag to the finance, sales, and technical teams. The finance team gets concerned if the total monthly sales of the POS/eCommerce system are higher than the accounting system because the financial statements will report incorrect data.
In some cases, the mismatch is caused by technical integration issues between the POS/eCommerce systems, the Order Management System, and the accounting system. Ultimately, the audit process ensures that the finance, sales, and tech teams are on the same page, that no sales data is lost in integration, none of the system’s sales summary reports are wrong, and retailer’s true performance is reflected in financial reports.
Challenges in the Omnichannel Retail Sales Audit Process
On a given day, Shopify merchants may receive an incredibly large number of orders. They are responsible for ensuring that the order data is imported into the accounting system without any data leaks or inconsistencies. Typically, merchants will implement an automated system that integrates with their eCommerce and accounting system. This automated system ensures that each Shopify sale and return is pushed automatically to the accounting system at the end of each day.
Omnichannel merchants use omnichannel Order Management Systems, which integrate with their eCommerce, POS, and accounting systems. Because online and in-store sales data flows from the OMS to the accounting system, merchants prefer to send returns to the accounting system from the OMS so that returns can be tracked from one place.
Due to unknown errors and bugs in the integration of OMS with POS/eCommerce and accounting systems, sales data may leak from POS/eCommerce to OMS to accounting systems. Thus, the monthly total sales and returns of the POS/eCommerce, the OMS, and the accounting systems may differ. As a result, some sales may not be pushed to the accounting system, and the retailer's true performance will not be accurately reflected in month-end financial reports.
Once they know which specific day's total sales aren't matching, they look at sales order item details of that day and determine if any sales order items are available in POS/eCommerce and not in OMS or accounting. All in all, to find and reconcile missing sales order items manually, finance teams spend hours and sometimes days of valuable time.
How can Omnichannel Retail Sales Auditing for Shopify be done efficiently?
Audit sales daily
Rather than waiting until the month-end reconciliation process, Shopify merchants are advised to proactively audit sales daily. Any differences between the daily sales and returns of POS/eCommerce, OMS, and the accounting system can be discovered and corrected immediately without waiting for the end of the month.
Use an automated software solution
A retail sales audit software will automate your sales audit by reading the daily and monthly sales and returns from POS/eCommerce and comparing them to the daily and monthly sales and returns in OMS. The software should subsequently read daily and monthly total sales and returns from the OMS and match them with daily and monthly total sales and returns recorded in accounting.
In the case where daily and monthly total sales and returns do not match, an automated email should be sent to the finance team and other key stakeholders, so they can investigate the issues and resolve them immediately. This report should contain the sales items that are present in the POS/eCommerce systems but are missing in the accounting system.
How does HotWax Commerce Omnichannel Retail Sales Audit Software automate the Shopify Sales Auditing Process?
In the HotWax Commerce Order Management System, all orders from eCommerce are downloaded and routed to fulfillment locations. As orders are fulfilled, the order status in eCommerce is also updated. Each day, HotWax Commerce generates a feed of Shopify orders shipped that day, aka online sales financial feed, and pushes it into the accounting system.
At the end of each day, retail sales financial feeds are generated from POS sales and pushed to the accounting system. In addition, the HotWax Commerce Order Management System also generates a financial feed and sends it to accounting systems for the completed orders from the POS/eCommerce system.
Also available through HotWax Commerce is the Omnichannel Retail Sales Audit software aka OReSA designed to automate the entire omnichannel retail sales and returns audit process.
Here's how it reconciles POS/eCommerce and HotWax Commerce sales:
Reads daily POS/eCommerce sales summary report from a pre-defined FTP location of POS/eCommerce system.
Reads daily sales and returns summary reports from a pre-defined FTP location of HotWax Commerce.
Compares the daily total sales of POS/eCommerce with the daily total sales of HotWax Commerce and saves the result.
All is well if the totals do not differ, and if they do, then it dives deeper by comparing the sales item level records of the POS/eCommerce sales summary report with the sales item level records in HotWax Commerce.
After comparison, OReSA generates a daily sales gap analysis report that lists the sales items records that are present in the daily POS/eCommerce sales summary report and not in HotWax Commerce daily sales summary report or that are present in daily HotWax sales summary report and not in POS/eCommerce sales summary report.
When the difference is found, the OReSA automatically sends an email with the difference in sales amount and daily sales gap analysis report to pre-defined users to investigate further and work on fixes.
Return reconciliation between POS/eCommerce and HotWax Commerce follows a similar process.
Additionally, OReSA automatically reconciles sales and returns between HotWax Commerce and the accounting system by comparing sales and returns summary reports. If there are any differences in daily sales and returns, a gap analysis report will be emailed to pre-defined users.
As a result, the OReSA automates the entire process of omnichannel retail sales auditing. It saves the finance team time when sales totals vary between POS/eCommerce systems and the accounting system. The system also ensures that data is not lost between multiple systems like POS/eCommerce, Order Management, and accounting and system integrations are working correctly.
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Merchants often find Shopify sales auditing to be very time-consuming and tedious. HotWax Commerce's Omnichannel Retail Sales Audit software (OReSA) ensures Shopify merchants aren't overlooking revenue, integrations are smooth, and sales and return data is not lost when it flows through multiple systems. Financial teams save a lot of valuable time and much of their manual burden is relieved. If you are interested in learning how our omnichannel solutions can take your business to the next level, contact the HotWax Commerce team for a free consultation today.