While managing the merchandise supply chain is second nature for many treasurers in retail and many other industries, the cash supply chain is often overlooked. By applying our four-step framework, treasurers can optimize the cash supply chain to free up valuable working capital.
1. ANALYZE IN-STORE CASH
The first step is gaining a better understanding of how in-store cash levels are determined and how cash flows throughout the supply chain, which can help you identify opportunities to free up trapped cash.
This may include eliminating redundant inventory and finding better uses for intraday cash. The goal is to determine store-cash levels by denomination level demand, which can reduce your cash requirements by up to 50%.
2. REVIEW THE CASH-OPERATIONS OFFICE
Next, review and document your back-office processes for managing cash. Aim to uncover opportunities to use new tools or systems, such as a Smart Safe, that can improve the flow of information and speed access to deposited cash. Working with your bank to create or leverage analytical tools can also help.
3. CLARIFY HOW DEPOSITS ARE DETERMINED
Find out from cash-handling employees how deposit amounts are determined. Are they simply calculated as the difference between cash-on-hand and a predetermined level? Are change orders based on instinct, or a demand calculation? It’s possible to discover actual use by tracking beginning and ending balances, received change orders and deposit amounts by denomination. This can be a useful yardstick while you nail down more detailed data.
4. CREATE VISIBILTY AND ACCOUNTABILITY
Too often, treasury does not have visibility into store cash demand and processes. Building a flow of information is essential for treasury to optimize cash. It is also important to establish metrics to track improvements. Assign accountability at varying levels, including individual stores, markets and regions.