Case study 3

Rosie is the Area Manager for a national clothing retailer in Australia. She oversees the operations of six retail outlets located across the eastern states.

Rosies responsibilities include monitoring retail sales and expenditure for her region. She must ensure that all six retail outlets are contributing to the organisations financial objectives by meeting monthly sales targets and expenditure budgets.

Rosie is feeling troubled, following a disappointing start to the new financial year. Total operating expenditure across all stores in Rosies area exceeded budget by more than 25 per cent. Rosie is concerned that all of her store managers have budget responsibilities, yet have had very little financial training.

As a result, Rosie reviews the current budget development and review process. Rosie meets with the human resources manager and finds there has been relatively little formal training carried out in relation to budgets and financial management.

Rosies research leads her to believe that store managers do not take a proactive approach to monitoring, controlling and reporting on store expenditure, which she attributes to their lack of training. To address these concerns, Rosie calls a team meeting with her store managers to provide them with extra training in financial management.

Rosie would also like to re-visit some of the stores contingency response plans, to ensure they are still relevant, in particular the stores decision to hold greater quantities of stock in the event of a stock shortage. She is concerned about the increased inventory carrying costs of such a decision.

List at least four key items Rosie should cover when discussing monitoring store expenditure with her store managers.

1. What cost controls could Rosie implement, given the unfavourable variance in all stores operating expenditure for the month of July? Tick all that apply.

q Ask team members to provide options and input for reducing costs.

q Make additional savings through resource sharing across stores.

q Carry out succession planning.

q Put a stop to non-essential expenditure and redirect funds to areas of cost blowout.

q Reduce travel expenditure by limiting travel between interstate stores and employing other communication methods such as videoconference calls.

2. Why is it now critical for Rosie to review and modify the stores contingency response plan for stock shortages? In your answer, suggest an alternative contingency response plan for stock shortages.