Not Gone and Not Forgotten: Why Effective Cash Handling Matters

The predictions that cash would be phased out and replaced by other forms of payment have turned out to be less than accurate. In fact, cash remains a critical and relevant payment instrument in today’s marketplace. A study by the Federal Reserve found that 26% of consumers prefer cash as a payment method, while 22% use cash as the primary way to pay for goods and services. And when it comes to in-person payments, the Fed reports that cash is used for 35% of purchases. For transactions under $25, that figure shoots up to 80%.

Even in the midst of the pandemic, cash has remained a vital payment option with $2 trillion in cash in circulation in the U.S. since the beginning of the health crisis. A J.D. Power survey revealed that 78% of Americans want all businesses to accept cash.

Much of the reason behind these trends has been generational attitudes toward payments involving credit. For many millennials, paying with cash is a preference. Even for older consumers, cash is perceived to be an easier way of staying within a fixed budget. In addition to these reasons, there are also a large number of U.S. consumers who remain unbanked or underbanked, making cash the only way to pay. A report from the FDIC found 8.4 million U.S. households were unbanked, while 24.2 million were underbanked.

What’s clear from all of these statistics is that cash is not going away anytime soon. That makes managing cash more effectively an important priority for many retail organizations.

Optimizing Cash Handling

Management of cash is necessary, but can be complex and cumbersome. Retailers face numerous considerations, such as staff safety, securely storing cash, effective counterfeit detection – and all the labor costs related to these activities. Treasury and finance organizations are also concerned with timely access to funds, challenges around reconcilement and reporting, as well as managing multiple bank relationships and armored couriers associated with cash handling and processing.

Within retail organizations, there are typically different stakeholders with varying interests around cash handling. For instance, store operations teams are often focused on finding ways to enhance core business, while reducing labor costs around handling cash and lowering courier costs by cutting down on the number of pickups.

Treasury and accounting teams are interested in improving liquidity, optimizing banking relationships, and achieving better cash control and improved reconciliation processes. While loss prevention teams focus on improving employee safety, reducing losses, minimizing shortage on tills and cutting down on investigations.

Because of the varying requirements for a return on investment (ROI), businesses should look for a flexible set of solutions that address different needs.

One Size Does Not Fit All

When it comes to cash handling solutions, one size does not fit all. Retailers should consider a continuum of cash services that will meet a broad set of needs. The cash services available today encompass everything from branch services, to cash mail-in solutions, cash vault, and smart/recycler safes. The key to fashioning the best approach is to identify overlapping needs, looking at various location cash volumes, staff and labor concerns, regulatory and risk tolerance, and differing geographic requirements. By examining these factors objectively, retailers can begin to apply the right solution to the right need.

When dealing with solution providers for products such as smart safes, its important to be sure that sufficient security measures have been factored in. The physical security of the safe is important, but so too is the safety of the data being transmitted by the safe. Hackers are a constant threat today, and having adequate security is imperative.

Innovative smart safe and recycler solutions can be very effective in helping with store operations, particularly in maximizing operational flows. The ROI here is often found in reduced labor costs. This doesn’t necessarily mean reducing head count, but instead, it frees up personnel to focus on customer-facing activities. Smart safes installed at store locations allow employees to simply feed currency into the note reader throughout the day. The note reader verifies and authenticates the currency and automatically tracks the deposit by employee and day totals. This type of currency processing solution helps eliminate errors and reduces the risk of theft.

More broadly, cash mail-in, cash vault, and smart/recycler safe solutions, when used in a holistic way, can deliver important working capital advantages. For instance, smart safes provide provisional credits within 24 hours of a cash deposit, dramatically speeding up access to receipts.

Safety and security are also improved using such solutions. Because receipts are regularly collected from smart safe devices by an armored courier service, employee safety is improved, as well as loss prevention.

Lastly, the data collected through these sophisticated systems can be leveraged by retailers to gain greater visibility into purchasing trends, delivering further value and ROI for the business accelerating reconciliation through data that is immediately available at the level you require, e g. employee or cash register.

Making the Right Decision

Finding the right solution starts with selecting a banking partner that truly understands the retailer’s business. The provider should offer solutions that are highly flexible, enabling the retailer to meet their specific business objectives. This approach may involve a combination of solutions that best fit the unique needs of the business.

Retailers need to do their due diligence in finding the right set of solutions and the right partner. Once those pieces of the puzzle are in place, it becomes possible to improve cash and currency processing, enhance cash flow and improve working capital management. And that can only be good news for any business.

For additional information on cash handling, contact your Treasury Management Officer, Relationship Manager or Find a Banker.