Accounting for the Fashion Industry
The fashion industry requires more than just your average accounting and tax services. Our professionals have the experience to design specific solutions tailored to the Fashion & Apparel industry. These services include:
You will benefit from our direct communication and relationship with your lenders and finance providers. We actively assist you in negotiating and maintaining relationships with these financial institutions.
Business Advisory Services
In addition to our compliance and accounting services, our professionals routinely assist you in evaluating and understanding your business and improving your bottom line. This process may include financial and cash flow projections, gross profit by product lines, manufacturing and financial information systems recommendations, and overhead and production cost reviews.
Tax Advisory Services
Our practice is heavily tax-oriented, in that tax planning is a key consideration for you. The integration of our individual and corporate tax planning, including trust and distribution planning, is particularly important in industries such as apparel and textile, where there can be large fluctuations in profitability from year to year.
Our clients include:
- Boutique retailers
- Fashion labels
- Wholesalers and distributors
Fashion finance: Role of Accountancy in a Clothing Business
This may not be evident at first, but fashion and finance work hand in hand. Any form of business all across industries needs to integrate key accounting principles in its operations.
Accountants take charge when it comes to bookkeeping and money monitoring. However, their role in your business encompasses essential functions beyond numbers.
Finance is often tagged as the life blood of a business. Whether you are in the business of supplying clothes, manufacturing, or retailing, your fashion business’ day to day activities require close monitoring, which can be done by a licensed accountant with the right accounting practices.
To help you with your accounting needs, this article rounded up some of the key functions of a finance professional.
Here are ten important reasons why you need to hire an accountant for your fashion business:
- Internal Processes
First, accounting helps simplify internal processes. Accounting is involved in tracking cash transactions including payroll processes and cash transfers. This helps in tracking cash flows and standardising cash-related processes.
When you put up your business, one of the most important aspects is to keep track of your assets. Every single unit named under your company must be accounted for – not only in terms of quantity but also in terms of its value. Value has two main types: acquisition and the net book value, which accounts for the depreciated amount, or its wear and tear. Accountants are knowledgeable when it comes to inventory monitoring and proper valuation of your company assets. This is basically saying how much your company is worth.
In the retail industry, time is of the essence because sales are volume-based. It would be tedious to account for every single item sold, and here is where accountants can help by introducing an Excel-based program or software to account for your revenue figures. Revenue reporting which includes year on year growth, trend report, vertical and horizontal analysis, is a turf that accountants specialize in.
Other than your revenues, your costs are equally important. Monitoring your cash outs on a daily basis is a specialty that accountants can offer to your business. Expenses can either be your operating costs or your investing costs. Operating costs involve the cost of your goods sold, while investing costs comprise of the fees involved in financing your business, like loan fees and interests. It is best to leave these functions to the experts so you can focus on business management.
Apart from monitoring and data mining, accountants would also produce a report of your financial performance. This is usually done by licensed accountants, which encompasses your statements of consolidated income, balance sheets and statements of cash flows.
Specialised reports can also be done, including day to day performance, sales reports and cost reports. These help in proper tracking of figures in the operations of the business.
Financial figures aren’t just meant to be recorded, accounted and reported. The most important thing is to scrutinise and monitor the numbers, the trends, and overall performance. Some of the key questions to be considered include the following:
- How is the revenue compared to previous performance of the same period?
- Is the cost of goods sold higher or lower than previous period?
- What are the main drivers of the movements?
- What can be done to bring up gross margins?
- What are the peak days and slack season for the sales?
- What contributed to the poor performance and how can it be alleviated?
- What are the pain points in the financial performance?
Competition is prevalent in the retail industry, given the fast-paced business environment amidst today’s trends. Hence, knowing where you stand is a very essential facet of running a business. Using the numbers that an accountant may provide, analytics can be done to provide a more in depth comprehension of your financial performance, in contract to your immediate competitors. How is your sales in terms of amount versus theirs? Does your growth rate concur with industry standards? Is your income margin higher or lower than the average? What are the factors that are making their revenue higher and what can you do to adapt them?
Apart from data mining, analysis and reporting, accountant also help you keep in track of your financial stance. Do you need a loan? Is your cash cycle ample enough to sustain day to day operations? This helps you minimise the risk of losing money over poor cash management.
Moreover, proper accounting would also help prevent instances of inside crimes like dishonesty, theft and other inconsistencies that concerns money. With proper bookkeeping of the figures, every cash out transaction will be properly accounted and suspicious activities will be carefully watched over.
In the fashion industry, there are certain rules and laws that need to be followed, particularly in proper filings of documents to governing bodies. Most of the time, for proper accounting of taxation, official financial statements are required by the government. In this case, an accountant would be of best help since accounting principles involve technical taxation.
Integrity of numbers is also important when it comes to financial compliance that’s why some companies choose to have their financial statements audited by accounting firms.
- Aide in decision making
The most important contribution of proper accounting in business management is the analytics that it provides to help in decision making. Are you going to expand? Which clothes sell the most? On what days do customers spend the most money for clothes shopping? Which items are easily being sold? Which outlet performs the best, and what are the practices that can be adapted by other units?
These are just some of the most important functions of an accountant for a fashion business. To sustain the operations of your business, a professional with a background in finance would help in understanding the risks, opportunities, and overall performance.
Businessmen often say that cash is kind and only proper cash management done by skilled accountants would give the royal treatment it deserves.