Automated Retail Cash Management Saves Time And Money
The following guideline is based on a retail store that trades 30 days a month, employs a CIT service six days a week and banks a monthly total of R1,5 million in cash.
According to Richard Phillips, joint CEO of Cash Connect Management Solutions, it appears that there is a belief amongst retailers that converting from traditional cash handling processes to an automated retail cash management service will add costs to the business.
Phillips however, says that this is not true, and that retailers can in fact save time and money by simply just automating.
1. In Store Cash Insurance
The national average cost of in store cash insurance is 1.25% of maximum exposure or R1,250 per month.
2. Cash-in-Transit Insurance
The national average cost of insurance of the cash while in the custody of a CIT carrier is .08% of maximum exposure or R1,200 per month.
3. Cash in Transit Service Fee
While this fee can vary dramatically between companies, the national average for a six times weekly collection approximates R3,900 a month.
4. Cash Shrinkage
Cash shrinkage can arise at various points along its route between the till and the bank account and in a traditional cash management environment the retailer is forced to introduce people to control people. Nevertheless, the national average approximates 0.15% of cash turnover. On the assumption that the store takes R50,000 in cash a day, shrinkage amounts to R75 a day or R2,250 a month.
5. Cost of Funds
In a traditional cash management environment the retailer receives value for his deposits the next day and in some cases this stretches to up to three days depending on various external factors such as the distance between the store and the nearest bank cash centre, the CIT vehicle routing schedule and sometimes the bank where the account is located and even the day of the week.
The delay in receiving value even for one day creates a permanent shortage of cash flow and a loss of one day’s interest. The cost of funds lost approximates 2% per night and can amount to R2,000 monthly.
6. Bank Cash Deposit Fee
The fee for banking cash varies quite dramatically but if banked via a commercial cash centre the cost averages R0.35 cents per R100 which translates into a monthly cost of R5,250.
7. Back Office Supervision
Without the aid of automated technology, the retailer has to employ a supervisor to receive and confirm what the cashiers hand in. Trials conducted in fast food outlets suggested that a store manager or supervisor will spend as much as 17 hours a week counting and verifying cash receipts from the cashiers. In many stores, a full-time resource can equate to a cost to company of at least R8,000 a month.
Phillips concludes that in summary this example store would spend R24,000 managing its cash. The equivalent, fully automated, cash management service that provides same day value to the store will approximate R8,850 a month and the risk is entirely removed from the moment the cash is dropped into the cash vault, thus achieving a saving of 40% or R15,000 a month.