The other week, we discussed our first smart tip for managing and implementing a successful cash supply chain and inventory management system – addressing customer demand. This week, our smart tip focuses on awareness of trends in the demand for cash. While we have all witnessed the unexpected over the last few months and recognize the importance of being prepared for the unknown, it is even more critical to be aware of ongoing and predictable trends that impact your cash flow. Here are five tips to help your financial institution optimize their cash supply chain and inventory.1. Discover the patterns of cash usage at your branch
The first thing you should look to identify are any patterns in your cash usage. Maybe you have higher cash demand on the first and third Friday of every month due to payday. If this is the case you might adjust your cash delivery to arrive during the first and third weeks of the month to accommodate, or you might ensure those particular orders are larger in specific denominations to account for the higher cash demand.2. Know what holidays and events affect each branch or ATM
Ensure you mark important holidays on your calendars because they have proven to regularly impact cash levels. If on a given holiday your branch is closed, then adjust your order accordingly so you don’t have excess cash lying around that week. On the other hand, holidays such as Christmas often bring customers and members in to request cash more frequently so your cash levels may begin to rise during the month of December.3. Calculate weekly outflows, such as payday
Similar to tip number one, you want to make sure you know exactly how much cash is leaving and entering your branch. It is best practice to calculate your inflow and outflow of cash down to the denomination daily, but without a cash supply chain and inventory management software in place, this is often difficult for many financial institutions. If you don’t have a software tool that assists with these calculations, make sure you manually calculate weekly outflow to account for high cash outflow on days like payday.4. Calculate monthly outflows such as Social Security
In addition to weekly outflow trends, it is important to make sure you are also aware of monthly high cash outflow days. For example, we see this occur when social security checks hit, or potentially when monthly bills are due at the beginning of the month that consumers tend to pay with cash.
5. Prepare for seasonality such as ballpark ATMs, fairs, watermelon season, etc.
In normal seasons when unexpected temporary events do not occur, such as the current pandemic we are in, we see geographic location, major sports teams and other seasonal festivities form the basis we lean on in determining cash usage patterns. There is nothing Atlantans love more than going to an Atlanta Braves baseball game on a Saturday evening, and during the baseball season the ATMs in the stadium have higher cash usage then they do during off-season. Although it remains to be seen what these upcoming seasonal trends hold for us during COVID-19, we do know that life will ultimately return to some degree of normalcy. These predictable patterns are just one of the many examples where banks and credit unions need to be aware of seasonal trends and adjust their cash levels at the impacted branches and ATMs/ITMs accordingly.
If you’d like more helpful inventory management tips, be sure to check out our new two-part webinar series, Cash Smarts, to learn more about how to implement a successful cash inventory system to reduce your excess cash in the branch without the fear of ever running out.