Originally broadcast on the Balance Innovations blog February, 2018
When I talk with retailers, I occasionally get push-back when we discuss the cost of accepting cash and how to lower it. It’s always interesting to hear why a retailer might not see cash as a concern, but once we start talking, they see how the hidden costs of cash can creep up.
While of course every retailer has their own unique set of circumstances that affects their cash-related costs, it’s important to think about some key factors before you dismiss the challenges of accepting cash.
“Our stores don’t take that much cash.”
While your enterprise’s annual cash sales might be lower than other retailers’, all cash in your stores must be managed properly to ward off loss. But some retailers just aren’t aware of how managing cash can quickly become costly if it’s done manually or outside of the latest industry best practices. In a just-released study, the IHL Group tells us that cash is used in 12.5 to 41.1 percent of transactions, depending on retail segment, and that the cost of cash averages 9.1 percent across all retailers.
Let’s do some quick math. If your business does $100M in sales, accepts the retail average of 30 percent cash, and you experience the average cost of cash (9.1 percent), it still costs you more than $2.7M every year just to handle and manage cash. Surely you can think of other ways you’d spend that money, and that’s not even counting your time at corporate or the cost of your cash sitting idle in stores. As the study notes, automated solutions can have a “dramatic return on investment against the cost of cash.”
If you have low-cash stores, you might think it’s not an issue for store staff to count, reconcile and rebuild the cash in registers each day. But many retailers have told us their store employees struggle even when there is little cash to handle because the required management becomes cumbersome and inefficient. Implementation of the right technology in the right stores, along with best practices, makes it a streamlined process.
“Cash is on the way out.”
This one is simply a myth. While electronic payments continue to grow, the popularity of cash remains strong: 32 percent of transactions are in cash, according to the Federal Reserve. And Forbes tells us that a combined 66.7 million Americans (more than 20 percent of us) are unbanked or underbanked, making it important that your stores are ready to take cash and serve all your customers.
“How I manage cash just isn’t a priority right now.”
Every retailer is juggling a thousand different priorities to try to capture customers and profits, and every retail IT department is starting to sag under the weight of all the projects that have to be completed to stay competitive.
RSR partner and Forbes contributor Nikki Baird writes, “We’re reaching the point where the customer experience can’t get any better without taking care of the supporting enterprise foundation…Retailers need to invest in IT to create a more solid foundation, and to enable future speed and flexibility.” A platform that not only lowers your cost of cash but gives you an accurate, real-time picture of what’s happening in your stores is one of the keys to that solid foundation.
The fact is, cash isn’t your biggest problem, but it’s one of the easiest to solve. And solving it the right way also gives you vital information about the health of your business at the store level. Seek out a cash management solution that takes a holistic approach to your business so you aren’t leaving money on the table.
This post originally appeared on the Balance Innovations blog