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Joerg Schmikale | 20 June 2016

Cash management in retail operations – important today, even more important tomorrow

Cash management in retail operations – important today, even more important tomorrow
Looking at the news these days, it would seem that the era of cash payments is coming to an end.

Is this goodbye?

The latest news I heard in this regard was that the European Central Bank plans to discontinue the 500 Euro note. “500 Euro note abolished – ECB starts the end of the cash-era” proclaims the Sachwert Magazine of May 23rd 2016. In February 2016, in Germany the main news was that the German Ministry of Finance has plans to limit cash payments to 5,000 EUR. The discussion about cash payments is actually nothing new. Here’s what the news reported in 2015: “Cashless payments overtake the use of notes and coins” – wrote BBC News in May 2015. “Cash is no longer king” – as well from May 2015, published by Management Today. But does this really mean that being able to pay with cash will come to an end? My personal answer to this question is: No. As regards the German Ministry of Finance news, there are doubts whether limiting cash payments to 5,000 EURO is legal. When it comes to the ECB news, the discontinuation of the 500 EURO note will still not affect the other denominations.

A reliable, enduring payment system

The Association of German Banks (Bankenverband) stated in April 2015: “Even young people prefer cash”. In April 2016, the Federal Reserve Bank of San Francisco wrote that ”The rise in payment alternatives may be chipping away at some consumer opportunities to use cash, but it does not suggest an end to cash’s role as a reliable, enduring payment mechanism”. Aid organizations, for instance, are very much dependent on donations in the form of cash – and they have a very strong social lobby.

What about retailers?

For retail operations with brick-and-mortar stores, this means that they need to be able to handle and manage cash today, and in the future. However, the costs to do so are high, and they may even increase. I am talking about internal labor costs, cost for external services like bank deposits and even banking fees. Some banks are ‘selling’ rolls with fifty 1 Eurocent coins, charging a ‘price’ of up to 1 Euro — that’s twice their real value!

Cash: costly and time-consuming

So how can retailers deal with such costs? By using special so-called ‘cash-recycling solutions’, stores can increase their cash-handling accuracy and reduce labor time. These systems can save time by automatically counting and refilling complete cash boxes. On the other hand, these solutions are a big investment and require some space, so they would not fit all types of retailers and stores. While larger supermarkets might benefit from them, a smaller fashion store probably would not. For retailers with few stores there are smaller systems, sometimes called ‘coin dispensers’, which can be connected to the POS. Still, they have some drawbacks: they require extra space, and retailers would need one coin dispenser per POS, and not just per store.

Technology can help

A simple and easy way for retailers to tackle the cost of cash handling is to use retail systems with integrated POS and cash management, both at the POS and in the store back office. These systems can even work alongside smaller cash-counting devices. The integration of POS and store back office allows the staff to manage the cash flow from the cash drawer and store safe, all the way to the bank. Counting by denominations is also a good way to keep track of the coins and smaller notes needed for giving change, and so helps with optimizing change ordering. Using cash counting devices can reduce labor time by automating manual processes. Working with safe- and bank bags can help reduce the costs of transporting cash. If retailers can delay the cash reconciliation process in the back office until the following morning, they can let staff leave straight after their shift - reducing overtime costs.   In his book ‘The house of the dead’, Russian Novelist Fyodor Dostoyevsky calls cash ‘coined freedom’. Well, this freedom has a price for retailers - but at least technology provides them with solutions so they have to pay as little as possible.   [hubspot id="1"]