Cash Management Considerations for Credit Unions in 2024: Part Three - An Action Plan

Published on
March 18, 2024
Written By
Luke Curry
Senior Consultant
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In Part 1 of this blog series, we looked at how the dynamic macroeconomic environment is increasing costs for credit unions. In Part 2 we touched on industry consolidation and the negative implications of scale specifically on cash management. Finally, in the last part of this blog series, we outline areas of the cash operation to focus on to remain optimized in this period of uncertainty.

Improve data hygiene to provide the foundations to build upon

This goes without saying, having sufficient, clean data on your network is vital. This way, you have the foundations to easily recognize areas of opportunity throughout your operation. Upgrading your data hygiene can be a quick, simple win which will provide the capacity for significant efficiency gains over the long term.

At the very minimum, credit unions should have daily withdrawal and deposit data per denomination per ATM, ideally by transaction. For branches, having clear visibility of your intra-branch cash movements is key, from the TCRs to the vaults to the tellers, with no duplication of data.

With these foundations, the following areas to improve upon become significantly easier to realize and implement.

Leave legacy forecasting techniques for best practice solutions

Cash forecasting is a significant piece of the overall cash management puzzle. As mentioned in Part 1 of the blog series, the cost of cash in the US has increased dramatically in the past two years. You are now likely paying 22 times more for the residual cash throughout your network, meaning the penalty for an inefficient forecast is increasingly evident on the balance sheet.

If forecasting is done internally, usually a legacy solution is leveraged. Given the time constraints, on ordering days, this drains the resource and often leads to increasing headcount. Software solutions are implemented to prevent this, but due to their one-size-fits-all approach, often lack the accuracy required to run an optimized network. Subsequently the outputs then require manual intervention to reign in the accuracy, which defeats the purpose of the software.

Best-in-class forecasting solutions are optimized specifically to the credit union and is considerate of each individual site's demand profile and unique characteristics. Utilizing specific cash industry expertise and scientific data algorithms provides industry leading results in forecasting. You can read about CMS Analytics' cash forecasting solution here.

Regardless of your current approach, we encourage institutions to track the accuracy of whatever solution, team, or tool they use. By doing this, individual safety thresholds can be applied, and the impact on residuals can be monitored.

Evaluate the performance of your cash management strategy

All too often, when institutions deploy a cash management strategy, cash forecasting is the main priority. While it is significant, it isn’t the only factor in a holistically optimized operation. In simple terms, cash management is the trade-off between armored costs and cash holdings. This is shown in the CMS efficiency curve below

All institutions lie somewhere on the graph. Pre interest rate hikes, the cost of cash was minimal, meaning the armored budget was the main burden on cash management. CMS Analytics found the optimal movement for institutions was an upward left movement towards the curve, as demonstrated by movement 1 in the graph above. Operationally, this would mean servicing your network less often, with more cash.

Now, with the interest rate hikes, minimizing the cost of cash is the priority. For an inefficient network, the optimal movement is a downward right movement towards the curve, movement 2. Operationally, this would consist of servicing the network more often, with less cash. In CMS’ experience with credit unions, we find the majority of institutions are over-serviced given the current interest rates.

With that said, there are a multitude of other factors that go into a holistically optimized cash operation. For example, CMS has modelled the impact of service frequency on hardware downtime and found that service frequency has a strong positive correlation with the number of faults that an ATM would experience. These, and many other operational costs need to be considered.

Regardless of your current strategy, all credit unions should review and readjust their network at each interest rate movement. Many institutions have reacted to the rate change, but not sufficiently enough to remain optimized. Network reviews can be carried out internally, or CMS undertake free cash management reviews for credit unions and compare your performance against industry benchmarks. You can schedule a free consultation review call here.

Automate as much as possible, starting with reconciliation

Reconciliation is regularly cited as the biggest pain point in cash operations. Given the complexity of cash reconciliation, this is typically carried out manually or on a enterprise level system which isn’t considerate of the nuances of cash. This, similarly, to manual forecasting solutions, drains manual resources and can leave the team in a bottleneck.

By utilizing an auto-reconciliation tool, engineered specifically to operate with cash, this will streamline the reconciliation process and improve performance. This allows the reconciliation team to focus on the more complicated items and clear the pile of aged items significantly quicker than a manual approach. Best in practice solutions should be able to integrate with all internal systems, have clear performance metrics of team members and carrier claim history, with daily MI report functionality.

Automating the reconciliation process as much as possible is something all credit unions will find merit in. This can be done by utilizing an external tool, CMS have developed Libra, a cash-specific auto-reconciliation tool with an auto-rec rate of 95%. Or this can be done automating elements of your current internal process. With the rise of ATM technology, automating this process now will save resource in the long run.


For a credit union, operating in a post-covid, high interest rate environment, the challenges of cash management are ever present and increasing with scale. In this blog, we touched on different areas to focus on to drive efficiency gains throughout your cash operation.  

Ensuring you have high quality data from network down to a granular level is a basic principle which will have a dramatic return on investment over the long term. Upgrading your forecasting techniques and moving away from legacy/software will increase the utlilzation of your cash and help realize hard cost savings.

All institutions should continuously evaluate the performance of its cash management strategy, we find the majority of credit unions are over serviced relative to the current interest rate environment. Finally, institutions should be looking to automate processes wherever possible, reconciliation is a good place to start to reduce the manual effort and improve a legacy process.

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