Effective Cash Management for Merchants

Published on
September 11, 2019
Written By
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As new technology sweeps across the payment landscape, cash continues to decline on a global scale. The physical properties of cash mean it is often cumbersome and time-consuming at the point-of-sale and in merchants’ back-office operations. This puts cash at a notable disadvantage against technology, where card and mobile payments are often fast, convenient, and intangible. These challenges are echoed throughout the supply chain, where the physicality of cash renders it more difficult to manage against the automated nature of electronic payments.

However, for many, cash is a vital payment instrument. The Federal Reserve’s 2019 Diary of Consumer Payment Choice revealed that in the US, the share of cash decreased by a modest 5% in the years 2016-2018. However, cash still serves as the payment instrument for 49% of low-value transactions (those transactions under $10), and 33% of payments between $10 and $25 – a 1% increase compared to the 2018 report. As these low-value transactions were the most common payments reported to the Federal Reserve, evidently, cash is still a valuable payment instrument. This is particularly the case for the 55 million underbanked US adults, estimated by the Federal Reserve in 2018, who rely on cash as their only means of payment.

As an increasing number of cities across the US ban cashless stores, including Philadelphia and San Francisco as well as the state of New Jersey, cash is clearly a fundamental tool for consumers – one that consumers will continue to use for the foreseeable future. US merchants should be looking for ways to effectively manage their cash operations for the benefit of their network and their customers. However, first, merchants must understand the challenges presented by the physicality of cash.

The Cash Challenges

Due to its physical nature, cash faces unique challenges and is coupled with a manual supply chain. These challenges must be acknowledged, and attempts made to streamline and innovate, in order to ensure cash remains a cost-effective payment method.

Multiple Locations: The tangibility of cash means that it must be held physically at all sites and moved through a complex supply chain by multiple stakeholders. For a large network, this means managing key relationships with multiple armored carries and banking partners – as it is unlikely that footprints match perfectly to allow you one of each. This is both costly and time-consuming and often introduces multiple processes for different suppliers.

Manual Supply Chain: Electronic payments are transferred almost immediately through a series of ones and zeros, with no physical intervention from other participants in the supply chain. Cash, on the other hand, must be manually processed, counted, and banked at each location. This is not only exposed to human error and shrinkage, but it also provides additional reconciliation challenges and a time lag.

Shrinkage and Risk: Merchants that handle, and often hold, large volumes of cash become over-exposed to various risks and subsequent shrinkage. Due to the physicality of cash, and often lack of supportive data and processes, shrinkage is largely driven by crime and human error, which become less prominent for other methods of payment.

What’s the Solution?

Merchants must develop internal processes, as well as strong relationships with suppliers, to pinpoint areas where cash can be managed with greater efficiency. Without concise data and tangible insights, that are often readily available for other payment methods, this is almost impossible. Merchants are left with few options.

CMS Analytics’ solution, CMS:Cash, helps merchants navigate the unique challenges of cash by minimizing the cost and time required to manage cash. Change ordering and armored carrier monitoring are centralized into one online portal, regardless of the number of armored transport and banking partners you have, to streamline internal processes. The control provided helps reduce cash balances by circa 30% while ensuring the best service is being achieved from the complex supply chain.

To learn more about CMS:Cash, or how CMS Analytics helps merchants save time and money in their cash operations, get in touch.

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