Cash Management Complexities: Five Key Reasons Merchants Are Struggling

25th May 2018
Richard Kyne
Richard Kyne

There can be little debate that cash transactions are in decline. The industry is flooded with news of bank branch closures, mergers and acquisitions, and falling cash volumes. The economies of scale provided by processing large volumes of cash can no longer mitigate against the high fixed costs of accepting cash as a payment method, leaving many merchants wondering: what can we do?

Network giants Visa and Mastercard have long attempted to promote card over cash payments through a variety of tactics, including Visa’s Cashless Challenge and Mastercard’s focus on payment innovation and wearable technology. However, as long as consumers still have a $1 bill in their pocket, they will want to have the option to pay with it.

These five key industry issues make cash management for merchants time-consuming, costly and complex. The hard truth is that many merchants’ operating expense budgets have outpaced their sales growth, and merchants are struggling to keep up. The inevitable result is that merchants will need to review their cash strategy.

Issue 1: Rising Costs

Many of the fixed costs merchants have to pay to have cash collected, delivered, and processed, are increasing rapidly. It’s difficult for merchants to accurately breakdown the cost of cash to assess the impact of these rising fees, and have a full understanding of areas in the supply chain where merchants can mitigate them. Merchants must ask themselves, are my cash pickup and delivery schedules optimized for each site in my network?  The answer could be costing the merchant community millions each year.

Issue 2: Poor Management Information

Merchant cash arrangements likely entail keeping track of suppliers for armored transport, cash processing, banking, and even cash office technology solutions. In a country as vast as the U.S., no one provider can service an entire merchant estate, which means MI will be reported in multiple different formats on a site-by-site basis, a nightmare for head office who often need to see the big picture. Merchants must ensure they are communicating regularly with suppliers about reporting options that are available, and keep up to date with any innovations that are in the pipeline as early adopters often maintain a competitive edge in the industry.

Issue 3: Inconsistent Service Levels

Carefully monitoring and reviewing service levels across a vast estate can be time-consuming and resource-demanding. Merchants must negotiate market-leading SLAs into their contracts. Well-managed service levels mean reduced internal administration, freeing staff up to do what they do best. Using an outside consultancy firm can often be a benefit here as they will be aware of industry best practice rates and benchmarking data.

Issue 4: Difficulty in Implementing New Arrangements

Merchants who review their arrangements and find that their current cash management solutions aren’t working as effectively as they could must think about implementing new arrangements. This can be a daunting task. Merchants have thousands of sites, often spread across a diverse and vast geographic area. At CMSPI, we often see clients leave legacy arrangements in place for far longer than they should because merchants are overwhelmed by the prospective of changing. CMSPI client data suggests that relative cash supply-chain costs between legacy clients and market changers has widened greatly in the past five years.

Issue 5: Local vs National Supplier

In a country of 3.8 million square miles, and with no armored transport carrier possessing more than 200 depots, merchants may find that carriers have to travel long distances to service many of their sites. Distances inevitably have a significant effect on both price and service quality. Longer distances often lead to poor service levels, which means that merchants retain more cash on site for longer periods of time.


Cash management is an area often neglected by merchants, many of whom tend to prioritize reducing the cost of card acceptance. However, retail cash handling is often very inefficient and costs can be reduced substantially for merchants that are proactive. Top-performing merchants are able to operate on cost bases up to 60% less than their rivals, providing a vital competitive advantage in this area.

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