sweating the small stuff – part two (lowering your Cash Cost)

I frequent this site to keep up with who is doing what, where and when in hospitality.  I’ve found about half the content recently is either economic-doom-and-gloom or hopeful-economic-optimism.  So which is it?  If you’ve come to this site to find the answer, I don’t have it for you.  Sorry…

What I do have are tips on how to optimize your existing technology solutions to either increase profits or decrease costs.  Today we are specifically focusing on lowering your Cash Cost.

Cash Cost is inclusive to each area your business incurs a cost in receiving cash.  This includes cash accountability on the part of the employee and cash accounting on the part of management.  Multiply this process for each individual employee that accepts cash and your Cash Cost can get expensive.

The prolific way to eliminate this cost is to go cashless.  Many venues across the hospitality space have adopted this model: such as this one, this one, this one, and this one.  But getting completely cashless requires cash, sometimes a lot of it.  Instead, let’s look at some small ways you can alleviate Cash Cost.

prevent cash theft

Most POS systems (probably yours too) have built in cash accountability to help prevent theft and cash counting errors.  The first step in taking advantage of this is to ensure your employees are not sharing POS User Accounts.  My experience is if employees get to share accounts, there is a good chance they have also get to share in an ” unofficial” employee bonus pool.  Second is to require employees to enter a Cash Drop at the POS.  (Whether this is a blind drop or a not should be based on your business requirements and employee job function.)  Requiring a cash drop allows the management staff to review system reports that highlight over/short employees saving time by focusing first on the problems.

increase credit transactions

Increasing Credit Card transactions is a good way to decrease Cash Cost (and is a type of cashless payment), but you need to do the math for it to make sense.  Getting the most from your merchant services provider requires transaction volume and aggressive negotiation.  If you are not sure about how to go about negotiating your fee contact a company like this that does it on your behalf and gets paid based on your savings.  To make any meaningful savings here you should also have a software based payment solution integrated with your point of purchase system(s).

The best way to increase credit card transactions it to market it, but you also have to incentivize the consumer.  This can be implementing a no-signature transaction policy (moot if we ever migrate to EMV) or joining programs that encourage customers to pay with their credit card (i.e. here and here).

implement gift cards

Offering gift cards creates the opportunity to decrease Cash Cost and encourage customer loyalty.  However, this is the type project where scope creep can kill the initiative so be conscientious and realistic in defining what you are going to implement.  There is a very good chance your point of purchase system (PMS, POS, etc.) or credit card solution offers or includes a gift card solution.  It will most likely not offer all the bells and whistles of this or this or this, but the goal remember is to initiate low cost steps in decreasing Cash Cost.

customer account integration

This is an often overlooked but simple option to move in the cashless direction.  Additionally, this option has the HUGE upside of tracking your customer’s purchase habits.  Again there is a good chance also your existing point of purchase solution some sort of customer account charge.  For larger venues the better option is to implement an integration between the point of purchase system(s) and the customer account system(s).

The basis of this solution is an interface from your POS system to your customer account(s) system.

Property Management System to POS:  guest transactions are paid with a room key and/or name
Membership Accounting to POS:  member transactions are paid with a membership card and/or name

As with automated product/item depletion there is a very good chance your vendors already have the interface in place, meaning you can implement it with a minimal investment.

currency counting integration

If you handle enough cash to use currency counting machines another interesting option is to investigate an interface from the currency counting solution to the POS.  I have only seen this integration implemented a few times, but it has proven to be a highly cost effective solution with a convincing ROI.  It usually is accompanied with a higher investment cost however as this type of interface is generally custom integration that uses the POS Accountable Cash data, POS Cash Drop data, and Cash Counted data consolidated to a single report for simplified cash accounting.

If you have someone on the payroll that has the sole duty of counting cash and reporting discrepancies, this is probably a worth while option to investigate.

Obviously this list is not comprehensive, but hopefully stimulates some ideas.  If you have successfully implemented other options or have other ideas post a comment and share your knowledge.  In times like this it is worth it to share our experiences so we all come out ahead.

For more information about kevin sturm Consulting please visit my website or email Me.

sweating the small stuff – part one (automated inventory depletion)

For whatever reason when revenue is up venues have the tendency to not sweat the small stuff.  I guess it’s because the small stuff doesn’t amount to much when focusing on the big investments.  But when revenue is down it’s time to look closely at where your staff is spending their valuable time.

The next few posts will be dedicated to the “small stuff”.  Each has a minimal time and dollar investment with a quick ROI.

automated product/item depletion

Manually entering inventory depletion should only be necessary if you don’t have a PC based POS solution (and even then it may not be required).  If you do have a PC based POS solution (and who doesn’t at this point) then now is the time to link the two system.

A basic overview of this interface is the POS system exports a text file (formats can vary) of product/item depletion.  This file is then used by the inventory management system to decrement inventory amounts.  A key prerequisite is a “Common Numeric Identifier” for each product/item that is shared; this is generally the SKU number.  Chances are good the vendors you use already have a functional interface, and it’s highly possible getting it turned on won’t cost you anything (except maybe vendor support fees).  If your vendors do not have an established interface you have a few options

option one
The first option is to work with one of your vendors to write a utility that meets the specifications of the other vendor.  For example, your POS vendor writes an export utility that produces a file matching the import specifications of your inventory control vendor.  Or, the inventory control vendor writes an import utility that uses the file format provided by the POS system.  Most vendors have vast experience with this option, as it is the most common and generally preferred solution  But, the price of this method can vary drastically among vendors.

Pros:  vendor supported interface, highly scalable for large volumes of data
Cons:  vendor may charge high price for development, any future changes to the interface require vendor time line

option two
The second option is to use a middle-ware utility to convert the standard POS export format to the standard import format for the Inventory Control system.  There is a multitude of middle-ware applications available allowing someone with development experience to accomplish this.  They range from free-ware applications to highly scalable solutions like Microsoft Biztalk.  Be careful however as the price of this option can unexpectedly creep as interface iterations spiral out of control.  The advantage is the opportunity to use the middle-ware application for other integration projects.  The important point here is data mapping.  Incorrect data mapping will lead to incorrect inventory depletion.

Pros:  scalable for large volumes of data, use middle-ware software for additional interface engines
Cons:  requires development experience, possible high cost of software and development

option three
The third option is to build a conversion utility with scripts, macros, and/or batch files. This process generally involves utilizing MS Excel and Visual Basic for Applications (VBA).  I would only recommend this option when working with small volumes of data (no more than few hundred lines of data per executed export file) and when manual validation of the process regularly can be performed.  Most IT resources (especially if they are a recent graduate with an computer related degree) have the experience necessary to build these utilities.  The important piece here again is data mapping.  Incorrect data mapping will lead to problematic inventory depletion errors and generally non-descriptive and unhelpful error messages produced by Microsoft.

Pros: internally owned, can quickly be implemented, low cost investment
Cons:  internally owned (yes it can be both), not scalable for large volume of data, high chance of failure

reviewing your ROI
To calculate your ROI estimate how much time is spent reviewing sales and product mix reports and how much time is spent entering depletion into the inventory system.  For convenience use monthly estimates.   Next, calculate the Estimated Monthly Task Cost of this process using the hourly rate of employee(s) performing the task.

Estimated Monthly Task Cost = (time reviewing reports  X  hourly rate) + (data entry time  X  hourly rate)

Based on which of the three options you choose to implement calculate the Total Project Cost.  If your vendor charges a recurring support fee for the interface in Option One, don’t forget to include that in the Total Project Cost.  Also, if you choose Option Two and pay for a recurring support fee for a middle-ware application don’t forget to include that in the Total Project Cost. (If you plan on using it for additional projects you may want to only include a fraction of the support fees.)

ROI = Estimated Monthly Task Cost / Total Project Cost

This is how long in months it will take you to recoup the Total Project Cost, allowing your employee(s) to focus on other revenue generating activities. You may even find your ROI is less than one month!

If you don’t have the experience or time to implement this interface give me a ring, I’d be happy to help!   But don’t forget to include the cost of the consultant in your Total Project Cost.

If you are wondering about an integration capability post a comment and I’ll cover the details in a future post.  Even if you think it is probably not possible, it may be.  I’ve seen a parking garage gate interfaced to the POS cash drawer…so almost anything is possible.

For more information about kevin sturm Consulting please visit my website or email me .