Financial institutions use limits to manage their cash supply chain and inventory, however there are “do’s” and “don’ts” of setting limits that can drastically affect your success. Today, we will discuss best practices your bank or credit union can use to set limits appropriately.
1. Plot usage and discover your branch or ATM’s cash trends
The overall industry best practice is to use a software application to track and document total daily cash usage down to the denomination. However, if you do not have access to a cash inventory management application, it is important that you keep track of daily usage yourself for each branch and ATM in your branch network. By tracking your daily usage, you will have more visibility into your cash supply chain and inventory that will help you decide on realistic limits.
2. Don’t use the status quo – just because a limit has been $500,000 in the past doesn’t mean it’s a good limit to have now
If we’ve learned anything over the past few months it is that nothing is “status quo” anymore, especially a financial institution’s cash supply. If your financial institution is still using the same limits now as they had prior to the COVID-19 pandemic, you may have found your branches nearing significantly low cash levels since there was in many cases an uptick of 20 percent in cash starting in mid-March. This is a perfect example about why we can’t rely on static limits for an extended period of time, especially now with an uncertain future in the demand for cash.
3. Don’t use insurance limits; these are typically much higher than actual usage
Through our many years of consulting banks and credit unions on branch, vault, device and ATM cash, insurance limits have consistently proven to be too high for most branches, thus becoming a significant reason that there is excess cash sitting at a branch. Make sure your branches are setting limits based on actual demand and usage.
4. Get buy-in from your staff on limit levels so everyone is on the same page
Experience is irreplaceable. When you are evaluating limits make sure to reach out to your knowledgeable team members to understand why they’ve been ordering up to a particular limit. This is another great way to get visibility into your cash supply chain and use actionable intelligence to make decisions about your vault, branch, device and ATM cash inventory.
5. Adjust the branch’s limits monthly
Similar to the tip above, don’t stick with the status quo and make sure to adjust your limits accordingly. This is the best way to ensure you aren’t carrying excess cash in various cash end points around the branch. Remember that true inventory management is the inflow and outflow of a product in either direction. As you track daily cash usage you might find some branches need more cash and others will need less. This variation will change based on different trends or outlying events, so be prepared to evaluate your limits monthly.
If you’d like more helpful cash supply chain and 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 and reduce your excess cash in the branch without the fear of ever running out.