With the increase of card payments, mobile payments, peer to peer payments like Venmo, and cryptocurrencies, there are many theorists who believe cash is dead. However, according to Payments Journal, it is alive and thriving. The Federal Reserve reports that cash is still the preferred payment method for transactions under $25 in retail and, specifically, quick-service restaurants (QSR) according to a QSR Magazine article. Additionally, in 2018, 41.1% of QSR transactions were in cash.
With all this cash in the market, the question faced by retailers and others who have physical notes on hand is how to safely store the cash and reduce risks? One option is smart safes. We began the discussion of smart safes in our earlier blog. In this article, we will continue the discussion and expand on another option, cash recyclers.
Conduct a Cash Analysis
It is important to begin by conducting a holistic and honest cash analysis of your cash and coin collection process. How much cash and coin do you currently intake? Are you constantly requesting change orders? It is also important not to forget to evaluate the future of cash in your business. How will the advancement of payment technology affect your business and in particular, cash payments?
Retail and QSRs are typically a good fit for cash recyclers and smart safes due to their ability to secure and automate the cash handling process. To improve checkout flow and change order processes, many QSRs and retailers are turning to the self-checkout options, which are essentially mini-cash recyclers. High cash industries like casinos are an example where a smart safe may not make sense.
Often Overlooked Considerations
Preferred Payment Methods
From our experience, the customer’s payment methods are often influenced by the method preferred by the merchant. Merchants either consciously, or subconsciously, make a particular payment method easier for customers to use. Should you redesign the preferred method of payment rather than invest in a large and costly smart safe or cash recycler?
Best Practices Training
Is management properly trained in the most optimal cash handling practices? Have your cash handling practices changed since the last time management was trained? We sometimes see managers simply deposit all bills and coins without considering the change order that will be needed because they either were not trained properly or did not plan ahead. Should management be retrained on the best practices? This exercise can improve a company’s efficiency regardless of whether they elect to go with a smart safe or cash recycler.
Smart Safe or Cash Recycler?
A key component of smart safes is a provisional credit feature. Banks typically provide the client provisional credit for deposits made into smart safes prior to the cash being retrieved by the armored courier. There is usually a fee for this charged by the bank, but the feature itself improves cash efficiency and forecasting for the company. Are the provisional credit, improved efficiency, and forecasting capabilities worth the investment for your business?
Cash recyclers, on the other hand, allow the business to recycle the cash inserted into them rather than immediately depositing the cash into the bank. The cash placed into the unit is validated and then stored by denomination for future use. These recyclers reduce labor and cash handling costs while maximizing cash inventory. An option to consider could be a self-checkout line that does not disburse cash back to customers.
Smart safes and cash recyclers are a big decision and a huge investment. Some of the questions we worked through while conducting a recent engagement are:
- Should you lease or buy a unit?
- What are the installation and maintenance fee(s)? This could include the delivery and setup fees in addition to monthly or annual maintenance costs.
- Is there enough physical space in your store to accommodate a unit? If not, will you have to remodel? Remodeling will delay the installation and add additional costs.
- Is your IT department equipped to accommodate the increased demands of a unit, both at implementation and throughout the lifetime of the unit?
- What are your existing or preferred future contract terms? Typical terms can vary anywhere from 1-5 years.
- Would you be able to discontinue or modify an existing contract rather than sign a new one?
- Has your current provider approached you about these products or offered to run a demo?
- Have you run a cost-benefit analysis of the unit?
Real World Examples
At the recent AFP 2018 conference, Walmart revealed how they rolled out cash recyclers in 4,700 US stores making them the largest user of cash recycling in the world. In Walmart’s example, in-store operations recognized savings almost immediately, but at the expense of redesigning their operating model, realigning with banking and armored car partners, and integrating software and reporting. Walmart additionally transitioned to a centralized and algorithmic method of ordering change for all their stores. Their case is an example of how transitioning to cash recyclers in addition to other big-picture cash management strategies can improve workflow, reduce errors, and ultimately increase the bottom line.
In a recent engagement mentioned in our previous blog, we learned one of our client’s armored car pickups and smart safe fees were bundled together. After analysis, Redbridge and the client decided the smart safe model currently in place provided an optimal cash handling strategy to maximize the client’s working capital by reducing float.
Redbridge is Here to Help
If you are questioning your cash handling processes, consider working with Redbridge’s team of experts. We have experience addressing and answering these questions with our clients over the past 20 years of engagements worldwide. Review some of our client engagements through our case studies webpage. Contact us for more information on our solutions.