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Bill's Building Blocks - January 2023 - Loose Change

Bill’s Building Blocks - January 2023
Loose Change

Apparently retail does not want to deal with paper money or loose change anymore!  I had these experiences in just the past week. After delivering my order a pizza parlor in the new Amtrak food court at Penn Station New York told me to either pay exact change or pay by credit card; she could not make change. A Wawa gas station attendant took my two twenties, stopped pumping gas short of $40.00, then told me he did not have change and that I would have to park and go inside to get it. The self-checkout at Home Depot was credit only. The self-serve order entry machines at McDonalds were credit only.

Consider a company’s cash management to be a closed loop supply chain of SOURCE, MAKE, DELIVER, and RETURN. Cash accounting is like inventory accounting in that ending cash equals starting cash plus receipts minus withdrawals. The bank has this view of your cash account.

The supply chain sequence begins with SOURCE. This is the bank where the company’s retail outlets get periodic cash allowances to make up their cash drawers. Bills and coins are split into the quantities of each denomination specified for each retail store. However, the denominations here are aggregated. For example with ten stores to each start the day with three 100-dollar bills in the till, then the bank would issue thirty 100-dollar bills.

Under MAKE the company builds the exact cash drawer for each day for each retail store. Now there are ten cash drawers, one for each store, and each drawer starts out with three 100-dollar bills.

DELIVER involves training the retail staff about how to make change. The retail staff and their managers are responsible for the physical security of their cash. Each cash drawer must be reconciled daily such that the ending cash equals the starting cash plus daily cash receipts from customers minus daily change withdrawals paid to customers.

Finally, RETURN is the collection, counting, and physical return of the periodic ending cash back to the bank. The cash supply chain closed loop is now complete.

Happy New Year 2023!!!

©2023 William T. Walker, CFPIM, CSCP-F, CLTD-F, CIRM has 42 years practitioner experience, authored Supply Chain Construction and Supply Chain Architecture, and teaches Supply Chain Engineering at NYU Tandon plus Demand Planning at Rutgers Business School. He is a 40+year ASCM member and APICS E&R Foundation past president. email: [email protected]