Lowering cash management costs – 7 best practices for the merchant community

The importance of efficient cash management

Despite a gradual decline in usage, cash volumes remain high and cash continues to be a widely used form of payment by consumers.  A combination of rising interest rates, increasing labor costs, reduced banking options, and industry-changing merger and acquisition announcements mean that now more than ever merchants need to focus their attention on optimizing their cash handling costs.

The four key drivers for merchants in all industries that deal with large volumes of cash are: minimizing costs, optimizing cash-flow, managing risk, and change provision. The challenge for merchants is that these key drivers are extremely complex due to the number of variable factors that can affect each one. Many merchants tend to operate labor intensive cashing up processes, which requires significant resource and is often prone to inefficiencies. Whether streamlining internal processes for cash handling, or implementing an optimal pick-up schedule, there are many elements of your cash handling that need to be considered to ensure cost-efficient arrangements are in place.

Understanding the opportunity

There is a huge opportunity for merchants to critically consider their cash management arrangements. With CMSPI's help, their clients have achieved six and seven-figure annual savings, as well as benefiting from optimal processes and reduced internal resource requirements.

CMSPI’s analysts use their proprietary Pinpoint:Cash software suite and extensive benchmarking data to provide scientific cash management solutions which are tailored to consider merchants’ unique operational requirements. Using scientific measurements of scheduling efficiency, risk levels and cash-flow, merchants can drive significant efficiencies in their cash processing, armored transport and banking arrangements. Below, we have highlighted seven key areas that merchants seeking to be market-leaders must carefully consider.


Seven key areas to address

1. Armored transport (AT) collection scheduling

Looking for the optimal AT schedule, one that does not breach safe or insurance limits, from the 120+ different scheduling options available, is a challenging task. In addition, no armored transport provider possesses more than 200 depots across the country. This means that many merchants may have sites in their estate with limited AT carrier options. A lack of competition can affect both price and service quality which, without strict service level agreements (SLAs), can lead to higher volumes of cash left on site, increased risk, and delays in receiving the value of cash in the bank. This will be an especially important consideration for merchants affected by the Brink’s and Dunbar acquisition announcement last month.

2. Time windows

Most AT providers prefer a flexible time window, so they can optimize their overall collection route. This means that the smaller the service window offered by the merchant, the bigger the impact on pricing. Unfortunately, this can sometimes be hard to avoid for many merchants as an AT collection during the busy ‘after-work rush’ and other peak times is far from ideal and often costly.

3. Multiple shifts

In many stores, the shift manager is responsible for the cash takings during their shift and the cashing up at the end. The large number of cash registers, along with different shifts, can lead to multiple deposits which can be labor intensive and time consuming to reconcile. Multiple deposits per day can not only lead to excess item charges from the merchant’s AT provider, but also to excess charges from the bank for processing each deposit.

4. Cash office technology (COT)

One way to tackle the issue of multiple deposits is to consider a COT solution such as smart safes and cash recyclers – an increasingly popular solution in many industries. Smart safes can offer a more efficient use of labor with minimized reconciliation efforts and reduced potential for external theft and shrinkage. A cash recycler option can optimize cash-flow as change and notes are generated on site, as well as streamline regular cash register skims. Same day provisional credit, available by linking the merchant’s partner bank to the safe, is becoming a popular feature and emphasizes the importance of finding the right hardware solution.

5. Change ordering and deliveries

As well as ordering cash floats, small denomination bills and coins may be ordered for change funds. The makeup of these coin orders (whether full bags or part bags) and the supplier (bulk till order or direct from bank) should be considered along with the ordering schedule. Merchants who carefully weigh up the benefits of a standalone change order vs a ‘piggyback’ order (an order that coincides with your collection schedule) can achieve significant savings.

6. Risk

Many merchants face the potential for monetary loss from both internal shrinkage and external theft. High-risk situations can occur when employees walk the cash takings to the bank, causing issues for employee’s safety as well as monetary loss. On-site risks can occur from having too much cash remaining on site and from the type of safe installed.

7. ATMs

On-site ATMs can be beneficial from both a customer satisfaction point of view (as customers don’t need to visit a second location to obtain cash), as well as being beneficial for merchants as additional sources of revenue. Depending on the replenishment model, merchants who use on-site ATMs can refill the machines using cash takings - decreasing the number of AT collections needed.


Key takeaway points

While cash management arrangements are complex, the benefits to merchants who get them right are substantial and can drive significant competitive advantage in a turbulent market. Rising interest rates, increasing labor costs, decreasing volumes and fewer banking options mean that the war against cash is heating up. Finding ways to optimize your cash processes is more important than ever.

It is difficult for merchants of any size to make decisions about their cash arrangements across various geographies, often spread state-wide as well as nationally. Merchants who seek independent advice often implement new arrangements faster, with better contract arrangements and SLAs in place, and require little internal resource – keeping your staff free to do what they do best.

Proprietary Pinpoint software provides merchants with the visibility and clarity needed to make informed decisions on a site-by-site level. Their analysts and consultants are experienced and understand the nuances that make cash arrangements so complex.

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