Are Traditional Financial Audits Dead?

Are Traditional Financial Audits Dead?

Are Traditional Financial Audits Dead?

Over the past ten years, the c-store industry has increasingly migrated to item level scan audits. It’s a difficult and painful transition for many chains; however, the rewards are significant. Currently, traditional financial audits make up less than half of our business. In addition, several clients that are not ready to make the jump completely to item level scanning are opting for a hybrid audit.

Let’s look at each type of audit in a bit more detail.

  1. Financial Audits are efficient, low-tech and easy to understand. In a financial audit, the total retail value of all the product available for sale in a location is calculated. It is broken down by category/department and geographic location in the store.
  2. Item Level Scan Audits are detailed, accurate and focused. With item level scan audits, the barcode (SKU) is scanned for each product and the quantity entered. It is then compared to the count for each item with “on hand” book figure for reconciliation.
  3. Hybrid Audits are accurate, cost-effective and versatile. Hybrid audits include some of the benefits of item level scan audits at a lower cost. Three types of hybrid audits offer store operators flexibility and options.

So, why is the industry moving away from financial audits in favor of item level audits? Two primary factors:

  1. First, many areas of the store are no longer priced such as OTP (other tobacco products) or beverage categories including beer. It is time consuming for the auditor to use price sheets or scan the items to get the price correct.
  2. Secondly, the complexity of categories has increased dramatically. NACS recommends more than 30 mainline category breakdowns (Version 7.1). It is virtually impossible for auditors to accurately distinguish between these categories.

So are traditional financial audits dead? No. They still play an important role in managing inventory and measuring shrink in the c-store industry. Many well run chains still use this approach. But the sophistication of pricing and category management will eventually make this approach obsolete. Just not yet!

It doesn’t matter if you do financial, hybrid, or item level audits. Quantum Services does more than just count — we provide insights. Contact us to learn how we can help you.

Looking for more information on item level audits? Check out: Is Item Level Auditing Worth It?

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