Sales Audit in a Retail Environment: Making Sense of it All

Last updated on December 14th, 2021 at 8:26 am by Jeff Singleton

What is Sales Audit?

We often think of audits as negative events.  This is especially true when we think of financial or income tax audits that cause great stress to confirm the proper dollar amounts are communicated to government offices.  As painful as audits may be, it is necessary to perform such activities to ensure proper procedures are followed in order to maximize efficiencies and keep organizations operating in a fair, honest and ethical manner.  Sales audit is no different in that regard.  The key difference between sales audit and financial audits is that sales audit encompasses the review of the whole entire sales process, not just one aspect of a financial area.

Why Sales Audit is Important

In a retail environment, it becomes especially critical that sales audit is applied in a manner to keep all sales postings to the financial backend systems and other consuming sales applications operating at optimal levels.  Point of Sales systems (POS) are the backbone of any retail business and are often the first system that customers interact with while purchasing goods.  These store systems contain rich data, providing valuable insights into shopping behavior as well as items purchased, discounts taken, and tender used.  With such a diverse set of data, anomalies sometimes occur with processing data in backend systems that hinder the usefulness of the data for the benefit of the organization.  Some forms of errors include bad master data such as invalid products in which case  the product being sold is unknown to the backend systems.  Bad product labeling at stores or cashier error are often the cause of such discrepancies.  If unknown items were to post to the company’s backend system, proper inventory levels would not be recorded.  Inventory levels of certain products would be overstated as the sale of the item is never captured.  The end results of these issues lead to out of stock inventory at stores as the item is never replenished.  How many times have you asked store personnel if they have a certain item in stock only to find that store systems display an available quantity that can’t be found on store shelves or in backroom inventory?  Incorrect item posting to backend systems leads to this kind of scenario.  This is very frustrating to the customer and  not good when trying to build a loyal consumer base.

Another common issue with point of sale data is the duplication of sales transactions.  This often occurs when the connection between the store POS systems and corporate backend processing systems are compromised.  Sometimes a transmission will drop in the middle of transferring data from the store to corporate headquarters where sales processing occurs.  When this happens it is not unusual for the point of sales system to resend data that was previously sent.  If there were no process in place to catch duplicate sales, then sales postings in the company’s backend system would be multiplied by as many times as the data is sent.  The results of such an event initially excites executive staff because they see high sales volume being produced, only to find later that sales were not correct.  Oftentimes it may take hours or days to realize that sales were not accurate.  This is not good if you are a business leader trying to operate a retail company with information that is not true.  I can only imagine how that feels:  You thought you had the winning Lotto ticket, but psych…just kidding…hope you did not make any major decisions before you found the real truth.

A good sales audit procedure will catch these types of issues.  When these anomalies are not dealt with in an appropriate manner, false information is interpreted as truth and incorrect business decisions are made because of it.  This can become a reckless practice and can end in disastrous results.  Having a sales audit process in place to capture glitches in sales data and being able to validate the consumption of data are paramount in operating a successful retail business.

The Value of Sales Audit Processes

A good sales audit process adds value to the retailer that may be unlike any other.  When systems are put into place to stop, control, and inspect data coming into backend corporate systems, better decisions are made using the data that has posted.  Making better decisions is the best value of all.  When companies trust sales data opportunities arise in managing other areas of the retail environment such as pricing of products, supply chain, promotion and markdown management, etc.  What better use of valuable time to manage these areas than analyzing sales that are posted?  Accurate sales posting will shed light on what customers are really buying from store shelves; or in many cases, not buying.  The value of a good sales audit system is in guaranteeing the quality of sales data consumed by many other areas of the business.

Quality Data Drives Decision Making

As retailers become more aware of customer’s shopping behaviors, it is important that sales data is accurate and that errors in data are kept to a minimum.  Otherwise, visibility is lost.  Sales audit is a process that should not be thought of as drudgery like with many other types of audits, but as a way to help build the retail company’s strength.  Guaranteeing data quality is the number one mission of sales audit.  Being able to help decision makers trust sales data and being able to react to it makes for smart business.  Operating in any other fashion is a waste of time and money.

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