While increasingly sophisticated swipes of plastic have garnered more attention in recent years, the majority of convenience retailers’ transactional business happens with bills in the till.
Whether it’s miscounts, skimming off the top, stickups or not-so-smart safes, a plethora of cash-management and -handling challenges come with the territory—a land where cash is still king (albeit perhaps a bit less noble today) and the coin of the realm can be a heavy burden.
The first step in getting better control over currency concerns is to gauge the extent of the problems. To help, CSP commenced its sixth annual cash-management study, commissioned by FireKing Security Group.
Among the major findings:
- Cash shrinkage (internal theft) and inefficient cash handling (counting, recounting, reconciling discrepancies and making bank deposits) topped the list for the sixth consecutive year—each voted the “most serious” concern by 57%. Inefficient cash handling, however, dropped 14 percentage points from 2014 to 2016 as in single-store operations as a “most serious” issue (65% in 2014 to 51% this year).
- Sticky fingers are a bigger problem in bigger operations. Sixty-six percent of multistore operators (MSOs) vs. 40% of single-store operators (SSOs) chose cash shrinkage as the most serious issue—a 26-point spread (the largest in this survey).
- Thief threats remain high. Robberies and burglaries, No. 3 on the list, are increasing as a “most serious” issue, as indicated by 33% of all respondents (vs. 24% in 2014), and by 37% (2016) vs. 18% (2014) of SSOs.
- Bogus bucks still bring headaches. Counterfeit currency, the No. 4 most serious concern, is the issue chosen most by respondents as increasing in seriousness over all six years of this study.
- At least 80% believe the seriousness of each of these cash-management issues has not improved each year vs. the prior year.
- Inability to track cash flow between the safe and POS is decreasing in seriousness; 13% now indicate it as a “most serious” issue vs. 21% in 2013.
- More MSOs are using networked cash management: They total 64% today compared to 46% two years ago.
- The percent of SSOs using automated coin- and bill-dispensing smart safes has nearly doubled since last year: It’s 19% in 2016, up from 10% in 2015.
Trap Door in the Drawer
Like many convenience retailers, Jonathan Ketchum, senior vice president of retail for Dallas-based Alon Brands, the largest U.S. licensee of 7-Eleven stores (operating 309 total), says the two cash concerns that top the 2016 survey list are reflected in his stores. Internal theft and inefficient cash handling account for nearly 80% of his operation’s overall cash loss.
“Despite robust employee screening, some undesirable sales associates still make it through the system and steal money, although they are usually caught by diligent field personnel or because they get greedy and steal large amounts,” Ketchum says.
“The average worker often still can’t tell a counterfeit bill from a real one.”
Inefficient cash handling has also been a sore point for Tony Hallum, a single-store franchisee operator of Mid-County Holiday, Cologne, Minn. “Careless handling has led to lottery discrepancies, like winners rung in as sales,” he says. And there’s also inventory blunders, Hallum says: “Staff ringing in three 20-ounce Mountain Dews instead of one Pepsi, one Diet Mountain Dew and one regular Mountain Dew.”
Jim Poteet, executive vice president of global sales and marketing for FireKing Security Group, New Albany, Ind., says c-store operators have to ask tough questions today in order to address these issues.
“Where is your business performance today in cash handling efficiency and shrinkage?” he says. “What are the specific characteristics that exist within your environment, such as volumes, physical location and payment demographics? And what’s the most effective way to solve these concerns?
“Most adopt one of three different approaches: a no-tech solution like asking employees to keep lower cash amounts in drawers; a low-tech strategy such as using manual drop safes and business-rated safes; or a high-tech approach involving integrated smart safes, dynamic business analyses and other tools.”
Internal theft solutions the 7-Eleven network Ketchum oversees include keeping low cash in the drawer; safe-dropping all $20 bills and larger; time-delayed safes; dual accountability at shift change; having a robust security system; and requiring the completion of accounting forms that are stringently reviewed by store and district managers.
Interestingly, compared to the 2014 survey, inefficient cash handling has increased in seriousness among SSOs by 14 percentage points yet decreased in seriousness among MSOs by 13 percentage points. “I would attribute this difference to multiunit operators having a more robust cash-management system offered in a given marketplace,” says Caitlin Catron, sales director for GardaWorld Cash Services, Boca Raton, Fla.
Internal theft, inefficient cash handling and bank-deposit discrepancies really come down to increased visibility at the transaction level, says Poteet. “The more visibility you have, the more knowledge you can apply toward a specific solution,” he says. “It might be a technology solution, or pure business process. The reality is that these are all solvable, but there’s no ‘one-size-fits-all’ solution.”
Walk-In Worries
Incidents of retail segment external theft are up despite current FBI data showing that robberies are on the decline nationally, Poteet says. He attributes the former to continued lackluster economic and unemployment numbers, “which are perhaps causing some people to be more desperate,” as well as a lasting trend of many operators making their own bank deposits.
“Robberies are unpredictable, and providing adequate training and preparation is crucial to the safety and security of the stores and employees,” Catron says. “If employees are not following a stringent cash-management policy or procedure, including sweeping tills every few hours, they are leaving the store with a lot of exposure.”
Ketchum says he employs a variety of tactics to discourage outside cash theft, including door height strips, “low cash in drawer” signage, excellent lighting and fishbowl mirrors.
Likewise, says Hallum of Mid-County Holiday, “Fortunately, we’ve never been robbed for cash or discovered any counterfeit currency.
“We have shoplifting and vandalism problems, despite good camera coverage,” he continues. “But we are very aggressive with shoplifters, safe drops and keeping low cash in the registers, which creates less temptation to steal.”
When it comes to problem No. 4, funny money, Poteet says the quality of counterfeit notes has improved while the cost to produce them has become more affordable: “The average worker often still can’t tell a counterfeit bill from a real one.”
Even with a counterfeit pen, “these notes, if washed, can still pass this common check point,” says Catron. However, industry best practices have evolved to use the capabilities of a smart safe and counterfeit detection, she says.
Playing It Safe
Mark Conan, vice president of finance and CFO for Plaid Pantries Inc., a Beaverton, Ore.-based chain with 112 stores, says the top five cash-management problems ranked on this year’s list used to be major worries at his company’s locations. That is, until smart safes were put in.
“They’re very effective at reducing errors and cash shortages. They also let robbers know that you have a very small amount of cash available,” says Conan, who uses Brink’s CompuSafes. “Now the biggest challenge we face is scheduling for safe pickups and ensuring pickup accuracy.”
Encouragingly, the percentage of SSOs having automated coin- and bill-dispensing smart safes doubled from last year (19% vs. 10%), and more SSOs appear to be adding automated bill acceptor smart safes, too.
“We are seeing a major shift with financial institutions reducing foot traffic at their branches,” Catron says. “Armored transportation combined with smart safes benefits both the banks and the operators by providing a secure alternative to transport cash and have it deposited to the bank in a timely, cost-effective manner, while reducing risk for an operator’s employees.”
By contrast, business-rated safes and manual drop safes registered a 14- and 8-percentage-point decrease, respectively, over the past year in terms of them being identified as very effective cash-management devices.
“These traditional safes are not designed as a robust cash-management system, only a deterrent, and do not secure cash from employees and external theft,” Catron says. “Conversely, smart safes are specifically designed to minimize risk and secure cash.”
Summing Up Solutions
Due to high turnover and heavy cash volumes, the convenience store remains vulnerable to cash-management challenges, particularly safety threats such as burglaries and robberies.
“But today, advanced technology offerings at store locations can make it a much safer environment for operators and their employees,” says Catron. “The initial cost investment in technology equipment greatly pays off to ensure the operators are protected and are aware of what is going on at each location at a given time.”
Ask Ketchum and he’ll tell you that his recipe for an ideal end-to-end solution is one that includes a smart safe in each store (preferably leased to limit capital expenditure); an in-transit provider (offering armored transport two to three times per week to limit cost) that grants provisional credit immediately at the bank; and cash reporting and web-based reports.
“We want a one-stop-shop program with a single point of contact, bundled services and automation of tasks such as counting money, preparing bank deposits and traveling to and from banking institutions,” says Ketchum, who continues to search for his cash-management holy grail.
The bottom line? Solving complicated cash-management concerns takes time, effort, investment and relinquishing of emotional biases—not so easy for a time-strapped operator running a day-to-day business.
“Companies need to be willing to throw out a lifeline and ask for help from trusted advisers who can analyze their businesses in a fresh way,” says Poteet. “The good news is that the industry has answers to resolve these problems. Cash-management solutions have come a long way in the last 10 years, and we’ll continue to make progress.”
Cash-Handling and Cash-Management Issues
| Most serious | % point change from 2015 | Most serious (1 store vs. 2 or more stores) | |
|---|---|---|---|
| Cash shrinkage (internal theft) | 57% | (7) | 40% vs. 66% |
| Inefficient cash handling (employee productivity loss: counting, recounting, reconciling discrepancies, making bank deposits) | 57% | (3) | 51% vs. 60% |
| Robberies and/or burglaries | 33% | 3 | 37% vs. 31% |
| Counterfeit currency | 30% | 4 | 35% vs. 27% |
| Bank deposit discrepancies (fees, time and effort resolving) | 18% | (4) | 12% vs. 21% |
| Cash exposure (cash not held in a business-rated safe) | 14% | 1 | 23% vs. 9% |
| Lack of information for cash forecasting | 14% | 0 | 19% vs. 12% |
| Security of device transaction data | 13% | (2) | 17% vs. 11% |
| Inability to track cash flow between POS and safe | 13% | 0 | 9% vs. 15% |
| Lack of detailed safe transaction data to resolve cash discrepancies | 11% | (1) | 8% vs. 14% |
| Inability to transfer data between safe and back-office systems | 10% | 0 | 11% vs. 9% |
| Safe not linked to bank allowing for provisional credit | 9% | 1 | 8% vs. 9% |
Source: CSP/FireKing Security Group 2016 cash-management study
Cash-Handling Business Intelligence Improvements Planned in the Next 12 Months
| Total | 1-store operations | 2 stores or more | |
|---|---|---|---|
| Proactive alerting of out-of-compliance cash-handling behavior | 37% | 25% | 44% |
| Expanded leverage of centralized information across operations, finance, LP and HR | 14% | 9% | 17% |
| Trend analysis capabilities to prioritize business rule improvements | 14% | 9% | 17% |
| Cloud-based central repository of cash handling information | 5% | 8% | 4% |
| Do not plan to focus on improvement in any of these areas | 49% | 60% | 42% |
Source: CSP/FireKing Security Group 2016 cash-management study
Cash-Management Devices, Tools, Processes
| Currently have in place | Consider very effective | Consider not at all effective | |
|---|---|---|---|
| Low cash in registers | 86% | 77% | 2% |
| Drop safes: manual | 82% | 60% | 3% |
| Secure business-rated safe | 75% | 69% | 2% |
| Separate coin/bill storage and access | 63% | 55% | 1% |
| Remote visibility/monitoring of cash positions | 57% | 65% | 6% |
| Remote visibility/monitoring of safe activity | 56% | 69% | 5% |
| Time delays: time lockouts | 50% | 71% | 2% |
| Safe and POS integrated with video surveillance | 48% | 73% | 6% |
| Detailed transaction reporting of deposits, drops, door openings and pickups | 46% | 65% | 3% |
| Automated alerts: door open, safe withdrawals | 44% | 70% | 3% |
| Central repository of cash-handling information | 35% | 56% | 3% |
| Consolidated cash reporting across multiple locations | 29% | 60% | 8% |
| Provisional credit—recognize cash in safe as deposit | 23% | 56% | 6% |
| POS integrated with safes | 17% | 68% | 4% |
| Automated coin ordering | 8% | 46% | 14% |
Source: CSP/FireKing Security Group 2016 cash management study
About the Survey
Completed in February, the survey garnered input from 176 professionals who run c-stores and make and influence decisions concerning cash flow/management/banking in their stores. Most operate one location (37%); one in four are responsible for two to nine stores (25%); 16% operate 10 to 49 units; and 22% are in charge of 50 or more locations. Those polled in 2016 may differ from previous poll participants.
Research by Barbara killeen, CSP research consultant
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