The Hidden Costs of Accepting Cash
A webinar with Balance Innovations | 3-28-17
Lower income consumers may not have access to credit and have become weary of electronic transactions. Millennials prefer cash because of watching their friends and family gothrough the worst recession in modern history. Millennials are concere4d about traceability and security of e-payments. Millennials are expected to control 10 trillion dollars of retail spend in the result of their lifetime.
Hard dollar costs for bank fees and theft. Time and labor is time being spent by cashiers and managers who count and handle cash. Inefficient reporting is the back hold or reporting to run down answers and is a productivity killer. All of these combined make up the total cost of accepting cash.
Bank fees can be $50-$100 per month to cover cash handling. Cash depositing, cash errors, change orders or corrections. In our example, what is the impact of bank fees on a 500-store chain? If you use $50 times 500 stores that is $25k per month that adds up to 300K in bank fees. Do you need to be paying $300k in bank fees? What if you had additional insight that could negotiate that down and what is the opportunity to improve that line item?
For 500 stores, armored car fees add up to 1.8 million dollars. The average cost of aarmored car visit is $15 per week. In this example, you can reduce up to $390K per year on armored car fees.
Tighter controls can help eliminate change orders. A box of change from a bank or armored car service is about $15 per box. If you reduce this by one per week, that is a $390K savings per year for the example of 500 stores.
Employees are humans and mistakes will happen. There is a lot of errors that take place, but there are employees that will steal. If you have 500 stores and $25 is missing of cash per month, that equates to $150k per year in cash that is lost in stolen. What if a third of that could be recovered? Paper and printing are also costs that need to be accounted for within retail. Electronic forms, data points and dashboards can reduce your expenses.
The time and labor costs looks at cashiers, bookkeepers and managers that are handling and processing cash and their total value of time involved in these activities. There are also opportunity costs which are harder to quantify –there are the benefits lost that could have been received and were given up due to another course of action (loss of addition time on the sales floor, lost customer service opportunities).
There can be a tremendous about of variation in this line item. The bad news is, this is the largest line item on our income statements. The good news is that we have a lot of control: labor can be reduced with better accounting and software. You can automate the easy and let a machine do it for you. You need your employees to do the most important customer appreciation activities and automate the cash managingactivities and it will pay off in dividends in terms of the customer experience.
It is very easy to overstaff cash offices. You want it done right, it is complex work and it can be complicated. Using our 500-store chain example…. Each chain spends 60 minutes of time per day counting and they were able to adjust this down to 30 minutes per day. 30 min a day times 500 stores equals an annual labor savings of one million dollars (based on minimum wage, 40 hrs. per week). You can remove this labor or reallocate is as needed.
The time spend handing cash impacts the customers experience. 41% of shoppers cite deepproductexpertise as an important factor in enhancing their shopper experience. Within the first 10 seconds a customer enters a store, the interaction they receive with a store associate could determine whether theyspend the next 10 minutes, days, years within your store. Greetings and smiles are a big deal…cutting down on cash handing time will also you to focus on your customers and give them a sense of belonging. It is very important that you reduce or eliminate the amount of time spend it the back office so that your employees can be on the floor and make a big difference in the experience.
Pickups can be a big expense for retailers. There is no one size fits all in this area it will depend on a number of factors within your business. Keep your disruptions to a minimum. Granting loans to tills is also a disruption. It slows people down to transport change and have people service tills that are low.
Stores that start tills at $100 tend to require more loans throughout the day. When you start with $200 dollars in the till you can anticipate80% fewer loans in the till which equals less interuptions with customer service and less interference with cash office activities. You can reduce the risk of transporting cash.
Inefficient reporting leaves room for bad data and can create a chain reaction so that many different departments must spend time investigating. Inefficient reporting is a productivity killer than can affect many departments: treasuring, operations, and LP. The best possible situation is that all the complete reporting is visible at one time.
Where should you begin if you want to find ways to lower the cost with accepting cash? You need to determine the cash volume and value 1st. You need to know your banking and armor fees, labor fees, and shrink loss rates.
In our 500-store chain example, the total savings is 3.3 million is savings in hard dollar costs and 1 million in savings. If you reduced your laborthere would also be 1 million savings of labor that could be saved or reallocated.
You must investigate all of the solutions and understand the differences between all of the solutions available to you. It is easy to overspend in the solutions. You need to have clear lines of cost and benefit analysis. Build you business case, spend wisely, and implement urgently.
Balance Innovations offers a cash of accepting cash work book and consultation free to all webinar attendees.
Q&A with speaker
Q: How do you standardize the process with so many tools? There is a variety of hardware that is deployed (safes, counters, smart tills etc.).
A: Work on networking these devices as much as you can. When they are standalone devices they are harder to work with. They can be networked and download data that can be used in reconciliation software. Don’t settle for standalone devices. When you have these devices networked, you can be smart about standardized workflow. You can show you emplo9yees how to sequence thereconciliation within the workplace. Make sure you can extract data and employee are trained and understand standard operating procedures.