Proper cash management is crucial to the health and profitability of your business. A cash management risk assessment indicates whether there are gaps in your cash management processes that are putting you at risk of theft, inefficiencies, and other cash management challenges that could otherwise be avoided. This assessment analyzes the various cash touchpoints, cash handling procedures, and cash controls in your environment to help improve your protocols.
Whether you’re in retail, financial services, grocery, or another industry, if you work with cash, you should conduct a cash management risk assessment. This is often the first step in not only protecting your cash, associates, and business profitability but also improving productivity and efficiency in the way your company manages cash. It will also help indicate where you may cut costs and save money.
Here’s what you need to know.
Signs You Should Conduct a Cash Management Risk Assessment
It’s good practice to conduct a cash management risk assessment periodically as a matter of course. However, there are some signs that might indicate that the risk assessment should be conducted sooner rather than later.
You have a high shrinkage rate: While average shrinkage rates vary depending on the industry, this rate is an indicator of poor or ineffective cash management processes that could be causing you financial problems. If you’re seeing a high rate of internal or external theft, accounting errors, or fraud, it’s a good idea to conduct a risk assessment to see where you may improve your processes to reduce shrinkage.
You need to reduce labor costs: Labor is often the biggest expense in a business. You may be tasked with trying to reduce this cost for your business in order to improve profitability, especially if you’re facing reduced revenues. You might be surprised to learn how many hours go into manual cash handling processes, such as transaction processing, cash counting and sorting, reconciliation, and cash deposits. A cash management risk assessment will help you see just how much cash is costing you in terms of labor, so you may determine how best to cut costs. Better cash handling procedures, as well as an investment in cash management technology, will improve efficiency and productivity while also reducing the amount of time employees need to handle cash.
Security is a top priority: Handling cash puts you at a higher risk of theft at the cash register, in the back room, and during transport. If you’re currently assessing your security protocols, ensure you conduct a cash management risk assessment as well. After all, if your cash is kept safe, it will improve the security of your employees and your premises as well.
Cash Management Issues to Assess
In a cash management risk assessment, you’ll look at every cash touchpoint and cash handling procedure and process to determine whether it puts you at risk of theft, inefficiency, high labor costs, and more.
During the assessment, you’ll examine the current precautions that have been taken and if others are warranted. This could include alarms, smart safes, and security cameras.
You’ll also examine your procedures, such as how much money is allowed in the cash drawer, how employees verify the authenticity of banknotes, and where cash is counted. You’ll also determine which cash controls are in place and whether additional controls should be implemented.
Consider the storage of money on your premises as well: Where is it stored and what security do you have in your back room? Is it time to upgrade your traditional safe to a smart safe?
You may also want to examine the transportation of money. Can the transport of money by employees be avoided? How can you make the transport safer? Where is your bank located? Is it in a safe neighbourhood? Is it a close distance? How is money kept out of sight during transport?
By assessing the different cash touchpoints, you will determine where there are gaps in your procedures and where there are opportunities to improve your processes.
