In our last blog, we discussed areas of waste in financial institutions that often go undetected. It’s important to remember that “waste” can be defined as inefficiencies in processes. Next, we will begin to break down each of the seven areas that waste can lurk in operational processes of a bank or credit union. The first area is caused by inaccurate cash inventory levels.
Having too much cash, or too little, are both detrimental to a financial institution’s efficiency and create waste in different ways. Running out of varying denominations results in poor customer satisfaction by not meeting customer demands within a timely manner. Alternatively, sitting on excess cash can negatively impact risk and insurance, and also creates a larger than necessary nonearning asset.
Financial institutions have varying degrees of challenges when it comes to their cash inventory levels, whether they realize it fully or not. Based on industry research, it’s common for banks to carry an average of 40-50% in ATM/ITM residuals. This excess cash adds up quickly across an entire bank network, and this trend is only increasing as the market continues to grow for devices. On the contrary, other financial institutions run out of denominations in a device, causing emergency shipments, additional expenses and dissatisfied customers. There’s often a fear of running out of cash, so it’s common for banks and credit unions to carry excess cash in their vault, recyclers and devices. The industry average for excess cash in a branch or vault is approximately 25%. Not having optimal cash levels at the right time and location can negatively impact a financial institution’s efficiency in time, money and customer satisfaction.
So, what’s the solution? Many industries use supply chain management software to manage their inventory levels and decision-making process. Banks and credit unions carry inventory in the form of cash, yet are often behind the times in utilizing the smart tools that exist for every other industry in performing similar functions around inventory. A cloud-based supply chain management software can help financial institutions forecast their actual cash usage down to the denomination level at each cash end point. This ensures banks and credit unions never run out of cash, but also aren’t keeping more than necessary at the branch. It’s time for banks and credits unions to change the way they think about cash.
To learn more about how these wastes are killing your financial institution’s efficiency, click link below to download our new e-book, “The 7 Areas of Waste That are Killing Your Bank’s Efficiency.”