New solutions for optimising cash in the retail industry
Joan Brancaccio is product management executive at Bank of America
Managing cash in stores remains a major challenge for retailers. Cash is expensive to process and secure. In addition, trapped cash hinders working capital management: When cash sits in registers and in cash rooms, it is unavailable for investment, debt repayment or business expansion.
Market leaders are meeting this challenge by developing new ways to manage store cash, says Joan Brancaccio.
Here, we discuss trends impacting the management of coin and currency in the retail industry and explore new technology solutions aimed at improving store efficiency and reducing costs.
Cash payment trends
While cash sales as a percentage of total sales are declining, managing store cash will remain a challenge for retail financial managers. That’s because the dollar volume of overall retail sales is rising, creating a net increase in cash usage. In addition:
- 43% of US residents do not have credit cards.1
- One out of five Americans does not have a debit or credit card.1
- In the most recent available data, 17 million Americans have no bank accounts.2
Treasury goals in retail
Today’s retailers are focused on increasing efficiency and reducing costs, and are exploring how technology can help them. Sales drive profitability, so retailers want technology to help free their staffs from duties – such as managing coin and currency – that keep them from spending time with customers.
Additonally, retail treasurers can achieve a number of working capital management objectives by more effectively managing store cash. They want to eliminate trapped cash, reduce armoured carrier fees, gain faster access to funds, reduce the risk of theft, and have greater visibility into their overall cash position. With these aims in mind, let’s look at both traditional and new banking solutions for managing store cash.
Traditional solutions
Some retailers continue to have employees physically transport daily receipts to a local bank branch. Unfortunately, this time-worn approach addresses none of the challenges noted above. In fact, it creates additional risk related to potential robbery and employee injury. Furthermore, with many bank branch networks being streamlined, depositing at a branch will become increasingly inconvenient.
Traditional cash vault services – where retailers contract with armoured carriers to transport store receipts to the bank each day – reduce employee safety risks, but have drawbacks. For instance, frequent armoured car pickups are expensive and disruptive, and managing armoured carrier relationships is time consuming.
Register balancing is a traditional vault service that some retailers use to reduce employee cash handling. With this service, instead of counting money and preparing a deposit, store employees place register contents into sealed bags or envelopes that are sent to the bank by armoured courier for counting and deposit.
Smart safes
New technology is enabling banks to offer more effective solutions for managing coin and currency. One is a smart safe that supports remote cash deposit.
With a smart safe service, a retailer typically contracts directly with an armoured carrier to rent a deposit-only electronic safe. During the business day, store employees feed excess cash and large bills into the safe. At the end of the business day, instead of preparing a deposit, funds are placed into the device where they are counted and secured. The safe is “smart” because it can count the bills, provide a deposit receipt and communicate the cash totals to the bank each day.
The bank provides provisional credit for the deposits – usually same- or next-day credit – while the cash remains at the store. The armored carrier picks up the cash and delivers it to the bank on a less-than-daily schedule, set to coincide with change order deliveries, minimising armoured car fees and disruptions.
Smart safes can improve employee safety, minimise cash-handling risk and errors, boost staff productivity, and accelerate credit for cash deposits. They do have a limitations, however. Because the smart safes can hold a limited amount of currency, they are best suited for smaller retailers or quick-serve restaurants. In addition, current safe products do not accept coins for deposit.
Recyclers
A newer solution that is a better fit for big-box retailers, grocery stores and large department store chains is a cash recycler. A recycler is a much larger piece of hardware that contains a smart safe, but also allows retailers to deposit coins as well as currency, and make withdrawals for change. It recycles the smaller bills, thereby reducing the need for change orders.
Cashiers can access the recycler at the beginning of a shift to fill their registers. When they deposit cash into the machine during the day, the recycler locks down large bills (i.e., $50s and $100s) and loads smaller bills into a recycling cassette. Cashiers can trade large bills for smaller ones at the recycler during their shifts. Because the recyclers are larger and only lock down large bills, and cashiers are withdrawing bills during the day, capacity is less of an issue. At the end of the day, cashiers empty the contents of their registers into the device. All transactions are receipted and recorded, and the device provides an audit trail by cashier or by register. As with the smart safe, the recycler communicates deposit totals to the bank. The bank provides same- or next-day credit on the deposits.
The recycler also has the ability to determine optimal cash levels in the store. Smaller bills and coins are kept in the recycler for use the next day and change orders are placed automatically. Deposit pick-ups are scheduled to coincide with change orders, further optimising the process and reducing armoured carrier visits to the store. Anticipated future enhancements include integration of cheque imaging technology to eliminate the need to send paper checks to the bank for processing.
Retailers considering using a recycler service should look for these valuable features:
- An end-to-end solution. A smart safe or recycler solution requires participation of a hardware provider, an armoured carrier and a bank. To streamline the service, look for an end-to-end solution coordinated by a trusted bank.
- Change fund. Does the recycler solution include the use of bank cash to stock the machines? If so, that can eliminate trapped cash and improve working capital management.
- A bank-agnostic solution. Many retailers are concerned with share of wallet and need to spread their cash deposit business across several banks. But this is only possible if the recycler solution works with multiple banks.
A better way
Retailers will continue accepting cash payments for years to come. Managing that cash efficiently can have an impact both on store efficiency and on working capital, directly improving the bottom line.
Traditional banking solutions – such as bank branch deposits and cash vault services – offer limited efficiencies. However, new technology solutions – such as smart safes and recyclers – can help retailers free up trapped cash, lower costs, reduce losses, achieve faster access to funds, and improve information management.
