Building a business case for better cash management

Dave Lunn TellermateWe all know that an effective cash management process can actually save a business money. Investing in updates to both strategy and technology to improve the way you manage cash, speed up counting, prevent fraud and eliminate cash handling errors seems like a no-brainer. But if this is the case, then why are so many businesses failing to effectively operate a streamlined cash management process?

The problem isn’t with the LP, Finance or Operations professionals that manage cash on a daily basis. The advantages of investing in an effective process (and even more effective technology), for these people are clear. The problem comes higher up the chain as senior stakeholders fail to understand both the importance, and the advantages of investing either resource or money into cash management programmes.

I’ve spoken to a number of LP and Retail operation professionals over the years who desperately want to introduce new cash management technology; but are failing to get buy-in from senior stakeholders. My advice here is always the same. Build a compelling business case. Show them the cold, hard, facts.

There’s something to be said for a few killer statistics coupled with a clear opportunity for improving the bottom line, and their ability to change the mindset of even the stoniest CFO. Below I’ve put together the arguments for improving your cash management processes, and some practical tips on how to build your business case.

Building the business case

Better cash management saves you money. Fact. According to a study by NCR the average retailer spends around 1-2% of their revenues on handling cash. For Banks, the figure rises to 5-10%. This means that in the U.S. around $60bn+ is spent per year on cash handling alone. And, with cash handling being just one part of the cash management process, it’s clear to see that cash management can be a costly challenge for businesses. Improved processes and efficiencies here could make a big impact on your organization’s bottom line.

Building a business case for cash managementAlthough many senior stakeholders may be quick to jump to the conclusion that “cash is dead”, this just isn’t the case. Present the evidence. The 2015 Australian Cash Consumer Insights study by Glory Global Solutions shows that cash is still the most popular form of payment, with 87% of consumers using cash. In the U.S. it’s a similar story. The Cash Product Office in partnership with the Federal Reserve Bank of San Francisco recently released a report highlighting that “cash continues to play a key role in consumer spending”, with 40% of payments still made in cash. And while, mobile and card payments are increasingly popular, with one in four consumers paying either mostly or exclusively in cash; the reality of a cashless society seems a long way off.

Take a look at your own revenues. What percentage of these are coming from cash purchases? How much does it cost to process this cash? How many man hours is your business spending on cash handling or cash management? Find some key evidence to support this and present it clearly.

Explain the current landscape, the challenges it presents and of course the advantages of a more streamlined cash management process. What will this more effective cash management process look like and what will be the impact of implementing this on the business?

I once spoke to the General Manager of a large sports apparel store where Tellermate were running a pilot of our T-ix solution. The Manager advised that they would have previously made up any shortfalls in cash drawers at the end of the shift from their own pocket. They explained that the alternative to this (reporting the loss to head office and launching a full scale investigation), was simply not worth the hassle. Plus, they told me “I just took my money back next time the drawer was up”.

What this shows is that if a process is deemed too difficult to follow, too stressful or too cumbersome, employees will often find ways to bypass the system, making up their own cash management processes as a quick fix.

This is bad for business. Not only does it impact morale, but more importantly, it can affect the level of visibility that senior management and the wider business has over cash losses and their causes.

Make sure that the solution presented in your business case is easy to follow and that it is a help, not a hindrance, for those staff who will be executing it on a daily basis.

Of course, one of the key persuasive arguments that you should include in your case for better cash management will inevitably be around lowering the costs related to cash processing.

How much time do your employees spend counting cash? Do they spend time auditing cash at the point of sale? How many times a day do they count the contents of the safe? Then of course, re-checking and reporting when discrepancies occur. Not to mention the time, effort and resource required to investigate a cash loss…

Put forward the case for cash counting technology. Implementing relatively inexpensive technology such as cash counting devices that can automate at least part of the cash management process will significantly reduce labour costs. The restaurant group Panda Express estimate that the implementation of cash counting devices saved around 8-12 minutes of time per cashier, per shift in their business. Multiply this by the number of closeouts your business completes each year, and you’ll have an indisputable case for change.

Getting buy-in

What are the implications for other areas of the business? Poor cash management has far reaching consequences. Liaise with and gather evidence from other areas of the business, such as H.R.

Consider also that your business may not be aware that handling cash is seriously stressing your staff, or your options for overcoming these challenges – and neither will your stakeholder. Gather statistics around morale, staff turnover and levels of internal theft.
Employee Stress Ebook

Talk to your Sales Assistants. Are they struggling with the day to day challenges of a poor cash management process? How does this affect their morale. Do they feel pressured into making more mistakes? Are they able to leave on time at the end of their shift, or does a poor cash management system leave them waiting around long after their shift has finished to count the takings?

Whilst this won’t generate quantitative data that can be directly correlated to your bottom line, bringing in the human element will enable stakeholder to see the real-world impact of a poor process, going beyond the numbers.

Framing your argument

By now you should have an incredibly persuasive argument as to why your senior stakeholders should invest in a more effective cash management process. But, even the best business cases can fall at the first hurdle. Follow these practical tips to ensure you present your case in the best possible way.

  • Timing is key: Pick a good time to present your case. It’s likely that any ideas presented after budgeting season will be parked for a later date, and eventually overlooked. Put forward your business case before budgets are finalized and when other demands for your stakeholders time are at a minimum.
  • Tell a story: Set out your business case to tell a story, from problem to solution. Include the current landscape and the challenges this creates; the goal, the solution(s) and the value that this will bring to both your stakeholder and your business as a whole. Ensure that you include not just cold statistics but emotional appeal. Explain how the problem or solution impacts on customers and employees. Use real testimonials to craft an emotional and persuasive story.
  • Be realistic: Don’t over/under exaggerate. You want to build trust with your stakeholder. You need to set clear expectations around goals, timeframes and costs. Any inflated benefits will stand out a mile and leave your stakeholder uncertain as to the validity of the whole business case.
  • The power of persuasion: Be convincing. Raymond Sheen writing in the Harvard Business Review explains how a number of techniques can be used to present your business case in the most persuasive way. This will result in an effective presentation that transforms “numbers on a page” into something more meaningful. Sheen argues that you should “lead with the need”, clearly stating the business need for your proposed solution and how this aligns with your businesses overall aims and objectives. Secondly, address your stakeholders’ concerns head-on. Are they worried about cost? Then be sure to discuss the numbers up front. Finally, make sure your presentation stands out. Avoid relying solely on information-heavy slides. Think about the argument you are trying to deliver and consider the medium that will best support this.

In short, combining these practical tips, with external evidence around the importance of effective cash management, alongside facts and figures sourced from your own operations; plus a clearly outlined solution that sets out the financial, operational and human benefits, should enable you to build a strong business case for better cash management within your business.

Read how Panda Express, a global restaurant chain implemented cash counting technology to improve their cash management process; resulting in direct cost savings that were delivered straight to the bottom line.

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