Modern Cash Management. 5 challenges for Cash Monitoring and Forecasting software solutions

Cash management systems in banking and other organizations are developing rapidly over the past several decades, continuously increasing functionality. Because of the growing demand for quality and additional functionality of solutions, “self-written” programs of credit and financial organizations and cash-services lose credibility. This forces one to choose one of twenty popular products on the market.

However, current banking sector trends are becoming a challenge for individual artisanal solutions and very successful advanced products. Due to the ever-growing customer demands and technological capabilities, CM products continue to progress. However, developers of specialized software for cash management currently focus on creating solutions for the most popular issues and less on the additional functionality.

1. Forecasting cash collection for cash recycling systems

The creation of algorithms for forecasting the demand for cash at each point of reception and issuance of funds is not an easy task. Software developers often invite highly qualified scientific staff to assist in the development of their products. For example, the formula for forecasting cash demand Cash Management.iQ was derived by specialists of the Kaunas University of Technology in Lithuania.

The introduction of cash recycling systems (ATMs and safe-recyclers) significantly increased the difficulty of the problem. The possibility of using the funds deposited by customers for subsequent issuance significantly complicated the algorithm of forecasting and proper collection planning.

Therefore, a single device can change its working status several times during one day. For example, an automated cash machine in a large shopping and entertainment center may have insufficient cash reserves at the beginning of the day, which is a significant issue because shoppers want to use cash to pay for cafes, movies, or other services. However, a short while later, the recycler may become overloaded because local outlets’ employees use these devices to deposit daily revenue.

Thus, devices become unavailable for significant periods, and proper collection planning becomes a much more difficult task.

2. Tracking the full life cycle of banknotes and coins

Requirements can change even for such a standard function of cash management systems as cash flow from the bank vault to ATMs. Modern specialized solutions use various generally accepted standards to unify the procedure for tracking packaged banknotes and coins. In particular, many European banks use the GS1 standard for marking and reading bar codes.

Such standardization allows building the most efficient infrastructure for ordering, receiving, and redirecting funds to endpoints at the level of relations between the bank’s cash centers and the central bank’s storehouses. The bank or cash collection service staff, equipped with barcode readers, perform routine logistics procedures faster and more qualitatively, which reduces the negative impact of the human factor.

In the short term, strengthening the position of standards similar to GS1 should allow real-time tracking of the path of each bundle of banknotes or coins within the cash circulation system of a bank or other organization.

3. Identification and rejection of worn-out bills

Banknotes’ life cycle includes a final destination – transfer to the central bank’s storage for recycling. Timely tracking of worn banknotes in the bank, trade network, or other organization is also an important cash management system task.

Not all suppliers of specialized solutions give this problem due attention, being content with rejecting only the most damaged bills, whose replacement is mandatory. Thus, such low-quality bills can again make their way to the end customer’s purse, which is likely to negatively affect his mood and give second thoughts to visiting a particular branch of the bank or a trade point in the future. Tracking worn-out banknotes in the system avoid such a problem by accumulating banknotes of inadequate quality at the regional and central repositories for further transfer to the appropriate central bank subdivision.

4. Integrated Cash Collection Management

The main driver for using cash management systems is the possibility of directly saving money on the number of CIT trips, whose costs for personnel, transportation, and special equipment are very high. Accounting for these costs and optimizing orders’ execution requires specialized software developers to go deep enough into the cash collection services.

Not all cash management systems allow forming optimal routes for collection, efficiently managing cash collection teams. Thus, the actual problems of the specialized delivery services themselves seem to be left without due attention of solution developers.

Deployment of an integrated system, which includes routine operations of cash collection services, allows creating a single organic working environment for the bank, outlet, and cash delivery service, achieving operational excellence.

5. Management of cash turnover at the micro-and macro-scale

The modern approach to cash management implies small, medium, and large cash circulation cycles within the organization. Specialists identify at least four specific cycles: inside a self-service device (recycler), within a bank branch or retail outlet, between several bank branches or retail outlets, and a cycle, that includes a whole network of self-service devices, bank branches, and other points of receipt and withdrawal of cash, as well as a bank vault.

It is believed that the shorter the circulation cycle of cash, the more effectively the organization manages the money used. One can agree with this with some reservations about the practical use of recycler devices.

Modern cash management systems should manage cash flows within each cycle and provide the analytical data necessary to develop and reorganize the customer infrastructure (bank branches, a fleet of self-service devices, etc.). Ultimately, an important requirement for such intellectual systems and the provision of standard operation reporting is the possibility of conducting a periodic rapid audit of the efficiency of cash flows within the client ecosystem.

BS/2 specialists will be glad to tell you more about the Cash Management.iQ product, which allows to effectively management cash circulation within the infrastructure of banking and other organizations, to forecast the demand for cash at each point of receipt and delivery of funds, as well as to control the progress of collection. Contact the company representatives for detailed information about the software solution’s capabilities and its implementation stages.

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