Cash management Optimization - The formula for drastically reducing cash management cost
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The document discusses a Cash Management Optimization (CMO) model designed to reduce costs and improve cash flow efficiency in organizations, particularly in the banking and retail sectors. By analyzing various factors and employing specialized technological tools, CMO can decrease immobilized cash by 30-40% and cash transport volume by 20%, while providing better availability of cash as needed. The implementation of this model centralizes cash planning, improves decision-making, and can lead to significant savings, prompting increased interest from organizations.
Cash management Optimization - The formula for drastically reducing cash management cost
- 1. IPnrSaicgthictasl “This model goes beyond efficiently managing demand in cash points (shops, ATM´s, bank branches and vaults) at the right time, but also seeks a breakeven point between several factors.” Cash Management Optimization, CMO: The formula for drastically reducing cash management costs With the high level of competitiveness in today´s market, it is crucial to optimize all financial resources in companies and institutions. One of the processes that pres-ent the greatest opportunity to reduce costs is Cash Management Optimization (CMO), especially for organizations that deal with high volumes of cash, such as the banking and retail sectors. The Cash Management Optimization model brings the movement of cash between participating entities-- both internal and external-- to an optimal level, by defining a series of processes, statistical models and technological solutions. This way they can guarantee that the demand is foreseeable, and that financial resources will be used efficiently. Manuel Hinojosa Business Director
- 2. “CMO decreases immobilized cash by 30-40% and reduces cash transport volume by 20%.” ‘Practical InSights’ es una publicación de Neoris. Este material no podrá ser reproducido ni copiado total o parcialmente, sin el consentimiento expreso de Neoris. Neoris ofree servicios de consultoría de IT y Negocios, especializada en la consultoría de valor agregado, tecnologías emergentes y soluciones de outsourcing. Con sede en Miami, Florida. Neoris tiene operaciones en EE.UU., Europa, América Latina, África y el Medio Oriente. Para obtener información oficina local, por favor visite www.neoris.com 703 Waterford Way. Suite 700. Miami, FL 33126 Phone: (1) 305-728-6000 / Fax: (1) 786- 388-3139 This model goes beyond efficiently managing demand at cash points (shops, ATM´s, bank branches and vaults) at the right time, but also seeks a breakeven point between several factors. It seeks to reduce the amount of immobilized cash (that which can´t be invested to generate additional financial resources), satisfy real cash demand in dif-ferent points, and reduce the cost of trans-porting cash through companies providing this service. For instance, some cases have proven a 60% reduction in missing cash at ATM´s and a 40% decrease in immobilized cash. The CMO Model analyzes and determines the efficient assignment of limits and security levels to determine the optimal number of deliveries and amounts. This formula deliv-ers more availability of cash where it is really needed and frees exceeding resources for other commitments or investments. To achieve this, the process design for the model must be multi-channel, flexible, and modular with a focus on growth according to demand. However, in order to establish improvements and procedures to optimize the cost of moving and storing cash, institutions must establish consumption patterns; routes, risks, transport costs, as well as schedules and delivery restrictions. All of these variables must be analyzed and managed through the imple-mentation of a highly specialized technological tool. The CMO Model can involve thousands of cash points with numerous and complex variables, such as location, seasonality, cost of cash, type of cash point, among others. This is why the optimization of this process through conventional tools is practically impossible. Retail and banking institutions, beyond having specialized per-sonnel in each of their areas (logistics, HR, sales, etc.), require a technical infrastruc-ture and personnel with expertise in Cash Management to optimize these processes. In spite of its apparent complexity, the implementation of a CMO Model represents important benefits such as: Enabling a central control of operations. Reducing costs, manual tasks, accounting errors, duplicity in functions and invoicing errors. Increasing efficiency, service levels, and operational control. In our experience in implementing this model, we have seen cases where planning has decreased urgent cash transports by more than 80%. However, the most important factor to keep in mind is the amount of money that could be gained by incorporating all of these variables in a statistical model for forecasting and planning. In fact, one of the biggest savings is in the decrease of unproductive cash, which frees resources to be destined towards other activities with higher profit margins. Furthermore, a CMO Model offers improved statistical infor-mation for decision-making, follow-up and control, increased visibility on cash supply and demand, limits to unproductive cash, and decreased amounts of cash transit per channel. The optimization of cash management is an important step in centralizing cash planning in an institution and setting the basis for a shared services model in the midterm, thus generating greater savings. Given the poten-tial savings (15-40% of decreased invento-ry levels) with the CMO process, especially in the banking and retail sectors, organiza-tions have developed a keen interest in this process. The CMO Model can involve thousands of cash points with numerous and complex variables, such as location, seasonality, cost of cash, type of cash point, among others. This is why the optimization of this process through conventional tools is practically impossible.”