The cost of handling cash may not seem significant for retailers. Such costs can often be hidden and variable, leaving your business with big, unexpected expenses. If you don’t know how much money your business spends each month on handling cash, it’s well worth your time to calculate the cost of handling cash.
You might be surprised to learn not only how much processing cash costs, but also where you’re spending the most money in the cash management process. It’s in your best interest to calculate these costs so you can streamline your cash management operations.
So How Do I Calculate the Cost of Handling Cash?
It may seem like a daunting task to calculate the costs of cash. Luckily, there are tools available that allow you to break down your cash management process so that you can easily determine the costs associated with each step. This gives you the chance to see where all of your costs are occurring throughout the process. You’ll likely find that each step has a corresponding cost. Using a cost of cash calculator will allow you to be able to reduce your expenses once you are aware of them.
The Costs Don’t Take Long to Add Up
You might be wondering why accepting cash into your business costs so much money; it seems like an oxymoron. When you use a cost of cash calculator to better understand your expenses, you’ll notice that the cash management process has many moving parts. This makes it difficult to budget your cash management expenses, as they are changeable. There are many factors that contribute to a high cost of handling cash including sloppy cash handling, the mismanagement of your cash flow, and poor organization. Any of these areas can increase your cash management costs; it makes good business sense to figure out where you’re spending the most money!
Some of the costs associated with handling cash are visible and can be expected from month to month. Visible costs include the materials and office supplies that you need to complete your cash management process such as coin wrappers, envelopes, and cash balancing sheets. While these costs add to your overall total, they remain fairly stable and can be accurately budgeted for each month.
The main area where hidden costs occur during the cash management process is in labour. Using the typical manual method of counting and processing cash, the amount of labour required can drive your costs through the roof. Since cash management is highly dependent upon accuracy, it can be a challenge to keep labour costs low when your staff must ensure that each part of the cash management process is done correctly. One mistake has the ability to not only lose money, but also increase the amount of labour time necessary to balance a cash register. Errors during transactions and during the cash management process add to your overall shrink rate when cash is lost. Each inaccuracy increases the cost of handling cash for your business.
How to Manage Your Costs of Cash
The first step to managing the costs of cash in your business is to calculate how much money your business spends on cash management. Understanding where you’re overspending on cash management will allow you to control those costs by making changes in your operations. One of the best ways to do so is by investing in automated cash management technology. Making use of technology reduces the amount of contact that your staff has with cash to eliminate mistakes and ensure accuracy.
There are many different options available for automation; you can make the right choice for your business to suit your specific needs. Calculating cost of cash allows you to run your business efficiently and error-free.