Future-proofing a fifth-generation family business in the digital era

Future-proofing a fifth-generation family business in the digital era

Fred Aldous is an arts and crafts store based in the UK. It has seen its fair share of changes as it has been in business for 138 years. As the company grew and moved into e-commerce, it faced finance management challenges. It made the switch from manual accounting to accountancy software platform, Xero. Using Xero to manage supplier payments has not only saved hours on an almost daily basis, but also allowed the business to build stronger relationships directly with its suppliers.

After more than 138 years in business, UK arts and craft store, Fred Aldous, has been through its fair share of ups and downs, including two world wars and a global pandemic. For Paul Walker, a fifth-generation co-owner and operator of the store, there’s one lesson that continues to ring true: treat your suppliers well.

Having helped countless generations of families unleash their creativity, Fred Aldous has been understandably thoughtful on expansion. After setting up shop in Manchester and Leeds, the business went onto opening its third store in Sheffield in 2020. Expanding into more locations during this period was a gamble given the disruption caused by lockdowns, but one that paid off and helped the business grow as people searched for new ways to spend their time indoors. Throughout this, Fred Aldous has always embraced technology to improve the quality and efficiency of their business and remain competitive.

Fred Aldous ventured into e-commerce early, building an online storefront with Shopify which helped the business not only survive, but thrive during the COVID-19 lockdowns. Ensuring the business had multiple ways of serving customers was critical, but there were also finance management challenges experienced along the way which were detracting time from the job at hand: helping customers bring their imagination to life.

Recognising the importance of supplier relationships

As felt by many small business owners, managing supplier payments can be incredibly manual if using older accounting software and therefore stressful. Switching to the cloud was life changing, but Fred Aldous was still using an external payment platform to manage payments. Fred Aldous’ accounts payable team manages two payment runs per week to more than 200 suppliers across the UK and Europe, therefore it has a large network of supplier relationships to maintain.

Because of the number and scale of payments, there was no cash in reserve in case of errors. They would break each payment down into smaller amounts to avoid running into security checks that could slow payments down, disrupt cash flow and put a strain on the team. Getting those payments wrong could mean missing shipments of key products or damaging relationships they have held for more than 60 years.

Catering to the changing payments landscape

Another changing tide that Fred Aldous has had to ride is the shift towards digital payments. The high street presence of the business means cash is still important in its operations – around 30% of consumer transactions are still completed with physical money. But the business has witnessed a movement towards contactless payments via smart phones and smart watches over the last few years, encouraging it to upgrade its till systems and offer more diverse payment options.

Recognising and adapting to how customers want to pay has been core to remaining relevant and retaining customers. No matter how customers choose to pay, they can now opt to receive an email receipt and it’s much easier to track shopping behaviour analytics and improve the seamless interaction with customers.

Investing in software for the future

Understanding the importance of sustaining relationships with suppliers but also streamlining how it manages its finances, Fred Aldous made the switch from manual accounting to an accountancy software platform. With longevity in mind, it selected Xero.

This transition to Xero proved to be a pivotal decision for Fred Aldous, offering a range of features that significantly improved its financial management processes. One particular aspect that stood out was the platform’s innovative approach to handling payments.

Having Xero’s bill payments feature in place has made it a lot easier to make payments. The business is now able to make batch payments for suppliers directly from Xero, saving significant time and effort in setting up, managing and reconciling payments.

When you’re a small business, every second counts. And the time saved from using open banking has allowed the business to improve its cash flow by paying consistently and negotiating better payment terms with many of its suppliers. Using Xero to manage supplier payments has not only saved hours and hours on an almost daily basis, but also allowed the business to build stronger relationships directly with its suppliers – some decades old – by figuring out how best to work with them.

Paul Walker, Co-owner of Fred Aldous, said: “Having the right technology in place means we’ve been able to build a system that makes sure we’re feeding back to suppliers and having good communication about what’s going on, no matter how small. It gives the supplier confidence in us and also clarity on when we pay. In Xero we can see everything now, not just what’s coming in and going out, and that’s hugely important for navigating the business. I can see what our position is at any point in the day, and if there’s anything that needs attention.”

Walker spoke further to Intelligent SME.tech about the partnership.

Which features on the Xero platform stood out to you?

Any of the time-saving features Xero has introduced make a huge difference for us every day. They are often based on customer suggestions, so are aligned with what a small business owner actually needs to run their business smoothly. For example, we work with nearly 200 suppliers and features like the auto-extraction of bank details from invoices ensures we always pay into the right account, even when their details change. This makes paying suppliers so much quicker and easier for us.

How has it allowed you to negotiate better payment terms?

The Xero platform helps keep us on track when it comes to paying suppliers on time, and ensures no invoices are missed. This has helped us grow and maintain strong relationships with our suppliers, with many of them stating we are one of their lowest-maintenance accounts. This reliability has, on multiple occasions, allowed us to negotiate better payment terms and secure additional discounts due to the goodwill we have accumulated.

How does Xero help you figure out how best to work with suppliers?

Creating and maintaining a good relationship with suppliers is one of the most important parts of running a business, and ensuring they are paid on time is a vital factor in this. Automating the management of these payments and providing clear insights into how this affects our cash flow means that we are better equipped to plan ahead. This gives our suppliers more time to prepare orders, avoiding last minute shortages or rushes. It also means we can avoid any cash flow crunches on our side.

What supply chain issues do you face?

Like many businesses we face challenges around rising material costs, shipping delays and increasing lead times for customers. However, fortunately our supply chain is very resilient. We intentionally avoid relying on just a few suppliers, meaning we can flex and adapt when challenges do arise. Also, many of our suppliers are based in the UK, reducing delays and ensuring a steady flow of products. Taking this approach helps us to minimise stock issues and keeps our shops operating all year round.

What’s next for Fred Aldous?

Our main goal is to last another century, and achieving this requires us to remain true to our identity and keep our uniqueness. This will only be done by focusing on our own products and constantly striving to inspire creativity in our customers.

Browse our latest issue

Intelligent SME.tech

View Magazine Archive