Cash Management

Effective & Efficient Cost Effective "Next Practice"

Wish u happy Weekend. Hope u might be enjoying Coffee to feed your sweet tooth and Grey cells.
I hope this blog post will be rejuvanate your Analysis Tooth also.

Dead Cash is the term used for the Cash filled in ATM but not withdrawn by customer for moretime. It is one of the cronic problem for any ATM NEtwork Manager.

According to the 2004 Dove Consulting ATM Deployer Study, deployers paid on average $180 a month for cash replenishment and $75 a month for cost of funds -- a significant chunk of the $1,194 average total monthly operating cost.

Many ISOs avoid these costs by asking merchants to fill machines with their own cash from the till. The merchant self-fill model isn't an option at some sites, however, because of security or other concerns.

"It's great to have an ATM that makes money, but the number one priority has to be the security of the customer," said Dennis Baker, owner of Supreme ATM, an Ohio ISO with some 100 ATMs under contract. "A rear-loading, through-the-wall ATM is the perfect scenario because they can load it any time. If they don't have that type of machine, but can load it before or after the store closes, that also can work."

Cash Management Thumb Rules:

Most ISOs using armored carriers have machines filled monthly, biweekly or weekly, depending on transaction volumes. Clatworthy encourages ISOs to "take the time to do some analysis" and determine optimal replenishment schedules.

Baker's formula for determining load frequency: multiply the number of weekly transactions by $55 (average withdrawal amount), then add 20 percent (in case unscheduled runs are needed). Divide by four, then round to the nearest hundred. Divide that number into the ATM's cash capacity, then round to the nearest one, two or four. This will help determine whether visits are needed weekly, bimonthly or monthly.

Analysis on Cash at Various Places in Supply Chain:

Baker said ISOs may be able to negotiate a better rate than the average $65-per-drop by asking the right questions during contract negotiations. For instance, ask if a carrier already provides a location with change orders.

"You should be able to piggyback on what that location is already paying," he said. "The carrier won't have any added miles and only limited additional exposure with ATM cash."

Schuldt, of Columbus Data Services, advises ISOs to ask a carrier if it provides its own service or sub-contracts with smaller carriers, a not uncommon practice. "You might be able to get a better rate by going directly to the smaller carrier," said Schuldt -- with the caveat that the risk of potential exposure could be higher for the ISO.

Find out when a carrier visits machines, Schuldt said. "If you've got a machine at a casino that does a lot of transactions over the weekend and they load it on a Monday instead of a Friday, that money is going to sit in the armored vault over the weekend costing you in interest."

Speaking of interest, Baker said ISOs should try to get carriers to commit to a one-day turnaround -- rather than the average two -- between the time it picks up cash from a source bank and fills machines. This concession is easier to obtain in large metro areas, he said.

All three men encourage ISOs to be wary of added fees, such as higher charges for deliveries outside standard service areas or fuel surcharges.

"You want to be aware of those and keep them as low as possible," Clatworthy said. "For instance, you may want to a contract to specify that fuel surcharges can't exceed the CPI (Consumer Price Index). If you've figured your cash costs, then all of a sudden you find yourself paying 4 percent more per drop for fuel, it can wreck your margins pretty quick."