Cash Management
Cash-Management Challenges for Retail Companies—And How Automation Can Help
This post covers a number of common cash management challenges experienced by many retailers, such as high overhead and increased risk of loss.
From the checkout to the back office, cash management can pose a unique set of challenges for retail companies at any scale. Rising to the occasion, innovations in cash-management technology are transforming those challenges into opportunities for unparalleled ROI.
In the retail industry—where the overheads can run high and the margins can swing low—cash can quickly become a liability. Factor in unique challenges with personnel and customers—including (but not limited to) cash-office duties, trainings, theft risks, and consumption trends—and cash management may seem like more trouble than it’s worth. With automation, this couldn’t be further from the truth.
In this guide, our experts cover some of the most common cash-management challenges for retail companies. We’ll start from a high level, zooming out to capture the key drivers that shape the success of every retailer. From there, we’ll zoom in to talk about traditional retail cash management and how it can negatively impact those same drivers. Finally, we’ll land on automation as an alternative with cash management solutions for the future.
Key Drivers for Retailers
No matter the market, all retailers have a similar recipe for success when it’s boiled down to the basic ingredients. We’ll use these ingredients—or key drivers—as our starting point for identifying challenges in retail cash management in later sections.
Operational Efficiency
Retail organizations typically have a net operating income in the single digits. Wal-Mart, for example, posted a net operating margin of 2.78% for the 2023 fiscal year. For that same year, supermarket conglomerate Kroger announced a 2.32% operating margin. The result of high overhead and production costs, razor-thin operating margins place an enormous amount of pressure on retailers to maximize efficiencies in store operations. Efficiencies can be found in virtually every area—including merchandising, store personnel, training, customer service, technology, inventory turns, just to name a few. Retailers are in a constant battle to maximize efficiencies and minimize unnecessary costs whenever and wherever possible.
Reduction of Overhead
Overhead—the costs of operation not directly tied to the production of goods and/or services—can eat up a lot of income in retail stores. Market estimates typically put the figure somewhere between 40 and 50 percent, with the largest overhead cost usually coming from staffing, then followed by real estate expenses, marketing and advertising, credit card fees, and other administrative costs. It’s no secret that the growing presence of self-checkout kiosks in large retailers such as Kroger, Home Depot, and Wal-Mart is designed to reduce store overhead and increase net operating income. The growth of self-service kiosks will only continue as stores iron out the details and scale the availability of these solutions.
Spending more time in the store
Nothing is more frustrating to a customer than trying to get help and no store employees are around. Many times, employees are in the back of the store tending to operational issues, such as checking till drawers in and out, and counting cash at the end of a shift. Since these duties are typically assigned to a store manager or shift manager, these critical resources are not where they should be – in the store, training employees, providing customer service, managing inventory, merchandising, managing vendors, or proactively looking at ways to maximize store efficiencies and build their brand. Too often the need for these resources to be in the back of the store outweighs the above activities, to the detriment of overall store performance.
Now that we’ve touched on a few key drivers for retail organizations, let’s address how handling cash can present challenges to some of these areas. To set the appropriate context, let’s review, at a high level, how organizations handle cash in the store at the start and end of a shift.
Keeping Customers & Employees in the Store
Product sales are the ultimate goal of any retail business—and, obviously, those sales come from customers. As it turns out, keeping both customers and employees in the store is a major factor in driving sales. The last thing a retailer wants is a customer leaving because lines are too long, items are difficult to find, or a store is generally uninviting to stay in. Available employees play a huge role in keeping stores clean and efficient while helping customers whenever possible. Likewise, automated solutions that keep employees out of the back office and directly improve the in-store experience are also vital investments for many retailers.
How Traditional Cash-Management Can Impact These Drivers
Taking a closer look at day-to-day of any retail operation, it becomes clear that cash management can pose a serious challenge to the success of stores large and small. In the following sections, we show how traditional retail cash management can negatively impact the key drivers to retail success that we covered above—while also showing how automation can provide a game-changing alternative to make cash competitive.
Reduced Efficiencies
When operational efficiencies can make or break margins, every second counts. In traditional cash operations, the time a manager takes managing cash on a daily basis is substantial. The time needed to check out a till to a cashier, check it back in at the end of a shift, conduct till sweeps (which will be detailed in a later article), count the cash in the till, and balance the cash against a POS sales report at shift close takes critical time away from the store. Depending on the store size and sales volume, a store manager many spend up to 2 hours per day handling these tasks, taking her away from more productive activities.
The Automation Alternative: With automation, the task of handling cash at all steps can be taken out of the manager’s hands and placed in the reliable care of a specialized device. Today’s cash-management technology has evolved to handle everything from accepting and dispensing cash to validating it, counting it, and preparing it for deposit—sometimes all in a single device. This translates to massive time savings for in-store personnel.
Increased Overhead, Increased Risk
With humans handling cash, there is an inherent cost and risk of loss. Starting with the cost: it takes a considerable amount of overhead to staff and train specialists in cash-handling. Add in the costs of CIT cash pickups, cash-related servicing, and even legal action for theft, and you can see how cash management can become a major contributor to overheads.
Moving to loss: there are a number of ways that stores can lose their cash when humans are involved. Loss can occur from human error (for instance: due to a mistake, the cash balance in the till at the end of the shift does not match POS sales and cannot be reconciled). Other losses can be attributed to theft, both from internal sources (employee theft) and external sources (robberies). Transporting cash to a bank also imposes a risk to those responsible. Retail organizations spend significant amounts of time and resources mitigating these risks, but they cannot be eliminated in their entirety. The key for a retailer is to find the right balance between the investments required to minimize the risks associated with handling cash.
The Automation Alternative: With automation, many of the costs associated with cash-handling can be avoided simply by taking humans out of the equation. When a specialized device counts the cash and prepares it for deposit, errors are all but eliminated. Likewise, with fewer opportunities to handle cash, employees and customers are less likely to steal or be stolen from. Today’s top retail cash-management devices—including smart safes and other versatile deposit solutions—are also highly secure, deterring theft overall.
Losing Customers to Lines & Cashless Rules
The third and final key driver for retail success from our last section was customer retention—and, as you might have guessed this far into our guide, traditional retail cash-management methods don’t always keep customers around. Cashiers can take a long time (and adding more is expensive and can come with other unwanted tradeoffs elsewhere in the store) leading to long lines that leave shoppers going elsewhere. Additionally, attempts to eliminate cash altogether also negatively impact customer retention. Going cashless makes transactions impossible unbanked shoppers—a sizable demographic that, in America, is estimated to account for somewhere between 10 and 20 percent of all adults—while alienating others who like to use cash.
The Automation Alternative: With automation, cash is handled by specialized machines that are both fast and adaptable. They help keep lines short; they offer an array of customer-facing options to handle both cash and cashless payments; and they provide cash-management features to consolidate everything from deposit preparation to reporting—keeping cash competitive with cashless on the back end, too.
Sesami Solution Experts
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