How Much is Your Cash Costing You?
04/01/2013
With the growing acceptance of electronic payment methods, one might conclude that consumers are finally making paper currency and coins an obsolete form of payment. However, that conclusion may be premature. Cash today accounts for at least eight out of every 10 payment transactions.1 And over the next 10 years, cash volume is expected to grow 1.7% per year.2
With cash and currency remaining a critical payment method for the foreseeable future, organizations must look for ways to optimize how they handle cash receipts. For retailers in particular, collecting currency presents a wide range of challenges, including mitigating loss from internal and external theft; reducing trips to the bank so managers are on the floor and available to improve the customer experience; ensuring the safety and security of employees and customers; gaining much needed insight into cash position across the organization; and collecting deposits more efficiently and reconciling them more quickly to maximize working capital management.
The following are three steps organizations should consider in order to obtain a more clear picture of their cash operations and identify solutions for processing currency more efficiently:
1. Get a Handle on the Cost of Your Cash Processes
For most organizations, the total cost of handling currency enterprise-wide is something of a mystery. Bank fees alone are only a portion of the cost. In order to determine the best solution going forward, organizations need to begin by establishing the full cost of existing processes. Consider factors such as armored courier fees; idle funds which fail to contribute to working capital management objectives; labor costs surrounding the non-customer facing task of having store managers make deposits to local banks; safety and liability related to employees handling cash both internally and externally at store locations.
Many organizations have made significant investments into new technologies to dramatically increase efficiencies and reduce costs, while continuing to rely on the same old inefficient, manual cash deposit processes which have been used for decades that can be costly in both direct and indirect ways.
2. Engage a Cross-Functional Team to Assess Daily Cash Needs
The key to finding and implementing a solution that truly addresses an organization’s daily cash needs is engaging a cross-functional team that includes critical stakeholders such as Store Operations, Loss Prevention, IT, Accounting, Treasury and Finance. Such a team can examine the full breadth of the organization’s requirements and set the stage for the development of new cash handling solution that will deliver needed efficiencies.
Begin by looking closely at how cash and currency is currently handled from point-of-sale to deposit and who specifically provides processing services such as banks, armored couriers, etc. Evaluate how well your existing approach to daily cash handling is working and where there is room for improvement.
3. Find a Bank Willing to Learn How You Operate
One of the most important qualities when evaluating a bank is whether they display an intellectual curiosity about your business. Fifth Third Bank prides itself on taking the time to understand a client’s cash handling processes, spending time in their stores learning the ins and outs of the operation. Fifth Third Bank assesses cash and currency handling processes to identify inefficiencies and risks. Currency processing professionals should talk to all stakeholders in the organization in order to learn how day-to-day functions at the point of sales actually work in their environment. This level of inquisitiveness allows us to help determine the best technology solutions to meet the organization’s needs.
Armed with a clear understanding of an organization’s cash handling needs, Fifth Third Bank is better able to offer a scalable currency management solution best suited for the size of the daily cash usage. The Bank’s innovative currency processing solutions can provide an effective means for improving operational efficiency while helping to reduce cash handling costs.
The Benefits of a Managed Service Approach
Rather than taking a piecemeal approach to currency management, savvy organizations are finding a managed service solution far more beneficial. Fifth Third Bank manages and coordinates all components of currency handling, from the hardware, to the armored courier and the backend systems and reporting. Customers benefit from a single point of contact in managing all aspects of the solution, greatly simplifying the receivables process.
With the right end-to-end solution in place, Store Operations can benefit from having personnel freed up to focus on customer sales and service. With smart devices operating at each store location, Loss Prevention may see a reduction in internal and external theft. Personnel safety may also be improved through the elimination of hand delivered deposits to a bank. The automated nature of the solution enables Accounting to reduce the number of banks being used, streamlining the reconciliation process. And the data generated by the solution provides insight into cash position across franchise, allowing more effective and efficient store management. Because the solution provides advanced access to provisionally credited funds Finance and Treasury are able to put critical working capital to work more quickly.
The ROI on a managed service currency processing solution can be truly compelling, which is why more and more organizations today are entrusting their cash and coin receivables to a bank with the technology tools and experience to solve the most pressing operational and financial challenges.
1Source: “Commentary: The future of cash in a mobile-digital world” by Mike Lee. Mobile Payments Today, December 2012
2Source: “What’s in Your Wallet? The Future of Cash” by Jeremy Gerst and Daniel Wilson. FRBSF Economic Letter, October 2011From Spring 2013 Issue.
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