As retailers cut costs and drive efficiencies across their organizations, internal audit functions are turning to technology to streamline processes, increase analytic capabilities, and supplement traditional store audits with continuous monitoring and standardized store self-audits. Solutions vary, but the common technology enabling this “do more with less” trend is low-cost mobile devices with cloud connectivity.
Protiviti forecasted this trend a decade ago when we documented the need for more comprehensive and agile store audit coverage in our white paper, The Retail Store Audit: Using Technology to Optimize the Audit Process.1 Our 2012 Internal Audit Capabilities and Needs Survey included a breakdown of retailer responses showing that store audit technology had become a top priority.2 Our experience in the field since then suggests that the adoption rate and maturity of mobile audit technology have increased to the point where retailers not actively pursuing mobile store audit technology initiatives risk falling behind regulatory and shareholder control expectations.
This paper revisits the recommendations from our 2006 study, updating them to reflect the emergence of big data analytics, cloud connectivity, and smartphone and tablet technology.
Benefits of Audit Technology
Technology changes the dynamics of both formal audits and store self-assessments by enhancing audit productivity, increasing operational effectiveness and improving reporting capabilities.
Technology enhances productivity by:
Uniform data collection from standardized electronic survey questions provides the most useful information for analysis. Audit technology can enhance consistency through customized scoring models and predetermined response selections for specific questions. Advanced collection rules can pose questions in sequence to elicit accurate and relevant responses.
Minimizing the impact of interpretation
Everyone interprets audit questions from their own unique perspective, which can cause problems with accuracy and render subjective questions all but useless. Audit software is designed to keep audits on track, with downloadable support documentation, context-sensitive hints and “help text” to clarify management expectations.
Eliminating data re-entry
Paper-based processes can be slow and cumbersome. The response time is further delayed as data is sent to corporate headquarters for manual collation and
synthesis before any further analysis. In an automated mobile solution, data is entered only once at the store into a web-based reporting system for real-time results, with no keying errors, no delays and no paperwork.
Increasing location coverage
In a large population of stores spread over a wide area, sheer volume demands audits targeted at specific stores, and some important locations may be lost in the rush. Self-assessment, coupled with improved productivity from a mobile reporting solution, not only allows auditors to physically audit more stores, but also effectively increases audit reach to all locations by providing a convenient and easy-to-use means of comprehensive store-level data collection and analysis.
Technology increases operational effectiveness by:
Generating action items automatically
Mobile audit technology allows retailers to implement proactive remediation solutions for survey responses that fall outside of a prescribed range. For all questions where an unsuitable response is recorded, the user
can be prompted immediately to assign an action item. Email reminders and action reports are effective management tools to ensure timely follow-up.
Facilitating shifts in responsibility
A fundamental capability in most automated solutions allows administrators to set and manage security privileges and user functionality and oversee changes to the organizational hierarchy by adding and moving stores from one jurisdiction to another, as needed, in the company’s structure.
A news bulletin board and in-app messaging can provide management with a way to create and distribute relevant updates to users. Automated action item notification ensures that tasks are assigned consistently to the appropriate users, improving productivity and communication among all team members.
Technology improves reporting by:
Reducing cycle time from data entry to reporting
Without timely data, leaders are left to make decisions with an insufficient understanding of performance. Audits that are completed via mobile app update automatically, eliminating the need to efax, transcribe or email audit data. By accelerating the audit cycle, management can make informed decisions about targeting low-performing stores and implement meaningful change.
Improving visibility of key performance metrics
With mobile audit technology, management can assess key performance metrics in real time. Armed with this intelligence, management can identify operational issues and respond with swift, corrective action.
Eliminating data redundancy and enhancing security
In a traditional paper-based system, audits are distributed via efax or email, which places data in multiple locations. This creates opportunities for redundant data to be stored on disparate, and sometimes unprotected, systems. With mobile audit technology, data is synchronized upon completion and saved on a secure, centralized server. This process optimizes storage requirements, creates a single source of truth and limits the proliferation of erroneous data.
Tracking store manager performance trends
High-performing store managers are moved often to help remediate lower-performing store locations.
Mobile audit technology allows retailers to track a store manager’s performance over time across multiple locations.
Tracking store performance trends
Audit technology not only can provide management instantaneous feedback on current store performance, it also can deliver insight into performance and compliance trends in real time. Organizations can use that insight to detect and resolve ongoing problem areas and improve the overall performance of the organization.
Additionally, the data allows management to rank stores and districts based on audit performance and, if desired, to create a competition for the best level of ongoing compliance.
Key Questions to Ask Before Implementing Mobile Audit Technology
Retail companies should consider the following questions before designing and implementing the self-assessment program and related mobile audit technology:
Who will own the store audit process: internal audit, loss prevention or store operations?
How frequently will the self-assessment occur? What will be the scope of the follow-up? Who will monitor remediation efforts?
Is management willing to review current practices to identify and prioritize company objectives, risks and controls to be addressed at the store level?
Will the use of mobile technology in the audit process be a shift in corporate culture? If so, is executive management willing to take a top-down approach and be the driver behind the new process? And is the leadership team prepared to do what it takes to establish a strong “tone in the middle,” by getting the buy-in of line-level managers who have significant direct influence on store-level priorities?
What does the business want to solve by automating the store audit process?
Will the audit software seamlessly integrate into the company’s technology infrastructure while adapting to the idiosyncrasies of its audit process, or would a cloud-based solution serve the business better?
What is the anticipated budget for implementing the audit technology? What is the time frame for implementing a solution? Has a return on investment (ROI) analysis been completed to estimate the potential savings and benefits resulting from using the audit technology?
Creating Conditions for Change
The change from paper-based audits to mobile technology can result in a cultural shift in any organization. Careful and conscientious creation of the conditions required to facilitate the change are necessary for a successful implementation. Like all corporate change, the tone of any project starts with executive management. Executive management will need to establish efficient and effective lines of communication and proper training. Most important, leadership must involve all affected levels of the organization in the implementation process.
Perhaps even more critical will be the ability of executive management to vest middle managers and store-level managers in the process. This “tone in the middle” has been shown to be critical to employee adoption, because workers tend to be more responsive to their immediate supervisors than to executive management.
Once mobile technology has been implemented, executive management will need to make a concerted effort to reinforce the necessity of the program’s ongoing use. From the scope of the audit and scoring model to accountability and follow-up, each element of the program must work in unison to reinforce
the program. It will be executive management’s responsibility to create the conditions that will allow the acculturation necessary to make the implementation a success.