Cash Commitments

Retailers continue to sweat mishandled money, theft and counterfeit bills.

By  Erik J. Martin, CSP Correspondent

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They say a fool and his money are soon parted. Yet even the smartest of convenience-storeowners can suffer significant cash loss without the right systems, procedures and precautions in place to guard against continual threats such as mishandled money, theft, counterfeiting and lack of cash forecasting information.

These and other cash-management challenges remain among the top worries shared by c-store retailers, evident in the recent results of CSP’s third-annual cash management study, which garnered responses from 191 convenience retail operators.

“Like any other part of the convenience-store business, [proper cash management] takes some effort,” says Dan O’Neill, president/CEO of North Platte, Neb.-based Kwik Stop Convenience Stores, which runs 21 locations.“It all begins with cash handling—one of the basics. This is not a very romantic subject but one that has to be controlled.”

Ask Glenn Mason, vice president of strategic partners for Tidel Engineering, aCarrollton, Texas-based cash-management solutions provider, and he’ll tell you that when the top cash problems aren’t well managed, exposure can increase rapidly.

“[Having proper procedures in place]typically keeps honest people honest,” he says. “Dishonest people will try to find away around them, so the more barriers you put up and the closer you manage them, the more likely they are to comply or move on.”

For the third consecutive year, Posen, Ill.-based Corporate Safe Specialists/Fire King Security Group commissioned the CSP 2013 cash-management study, which was conducted in February. A majority of respondents were single-store operators (51%), followed by those with two to nine stores (23%); 12% operated 10 to 49 outlets, and 14% ran 50 or more locations. (Respondents to the 2013 survey may differ from those who participated in the past two surveys.)Results of this year’s study reveal several key findings:

Operators can’t shake shrinkage and cash-handling issues. For the third year straight, the two most serious cash handling/management problems facing c-stores are inefficient cash handling(e.g., counting, recounting, reconciling discrepancies, making bank deposits) , at 62%; and cash shrinkage from internal theft (57%). However, the good news is that both have registered 7-percentage point decreases from 2011 to 2013.

Non-employee theft is the No. 3 most serious concern. More than one in four ranked robberies/burglaries third on the list, up from No. 4 in 2012.

Fears of funny money may be shrinking. Counterfeit currency was ranked by 26% as the fourth most serious issue, down from 31% in 2012 and 30% in 2011.

Some niggling worries have spiked in seriousness. The three areas that have seen the highest increase as among the most serious cash handling/management problems over the past three years are lack of information for cash forecasting (25%, up 9 points since 2011); inability to track cash flow between POS and safe (21%, up points since 2011); and safe not linked to bank allowing for provisional credit (12% up 7 points since 2011).

One-store operators feel the heat. More single-unit operators rank inefficient cash handling as a more serious issue (62%, up from 58% in the past two years) than multi-unit operators (59%, down 17 points over the past two years). Single-store operators also voted cash forecasting (21%) as amore serious cash management issue than their multi-store counterparts (11%).

No change in the top tools. The top four cash-management devices/tools/processes that c-store have in place remain, for the third consecutive year: low cash in registers (86%); secure business-rated safes (81%); manual drop safes (75%); and separate coin/bill storage and access (62%).

Perennial Problems

Handling money inefficiently and cash shrinkage continue to concern c-store owners in 2013, and for good reason: There are multiple touch points for cash in a store.

“Without really strong procedures and policies that are documented, trained and managed, and without holding people accountable for these issues, you end up with these two problems,” says Jim Poteet, senior vice president of product strategy and innovation for Brink’s Inc., Dallas.“And as soon as you have one—inefficient cash handling—that introduces the opportunity for cash shrinkage. They both go hand in hand.”Jonathan Ketchum, senior vice president of retail for Dallas-based Alon Brands Retail, the largest U.S. licensee of 7-Eleven stores, says cash shrinkage is the top concern at his locations, where managers are responsible for bringing money to the bank and manually counting deposits.

“We’ve seen a rise in (internal) cash and deposit thefts in the past 12 months. They are especially prevalent on the weekend, when an employee can go to the bank and night-drop one deposit instead of two. That way, they are captured on tape at the bank and can claim that the bank ‘lost’ the other deposit,” says Ketchum, whose stores collectively average five to six deposit losses per year, totaling $100,000 in deposit losses annually.

In many instances, the old way of doing things—such as counting cash by hand and having employees make bank runs—can be risky and outdated but are preferred over expensive alternatives.

“We estimate this takes one to two hours of non-productivity a day. However, we do not believe that the [return on investment]is justifiable to move to automation or armored car. We believe that there is no labor savings, as we are paying the store manager regardless,” says Ketchum. “The cost of upgrades is higher than the annual loss.” (His stores average approximately $10,000 in total cash losses per month, or $1.11 daily per store in 2013.)

To help curb cash-management inefficiencies and cash shrinkage, O’Neill’s stores conduct random audits, issue warnings and, when necessary, fire employees.

Holdups and Break-Ins

External theft persists as a problematic matter for c-store operations, underscored by a rise in burglaries and/or robberies, making it the third most serious issue, up from fourth last year. Particularly worried about this are single-store operators, and more of them chose this as one of their most serious issues in 2013 than in 2012 (28% vs. 22%, respectively).

“In most parts of the country, the economy and the job market haven’t recovered yet, so there’s still a considerable amount of desperation out there,” says Poteet.“This problem also speaks to the fact that single stores and smaller operations either have no alarm system whatsoever or are using an inexpensive alternative like a residential alarm system in a commercial environment, which doesn’t really work.”

Aside from a quality alarm system, robbery and burglary deterrents that work include window/door decals and signage indicating that the manager cannot open the safe and the store carries bills no greater than $20; video surveillance cameras with Web/Smartphone viewing and recording capabilities; strobe lights; and panic alarm buttons.

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