March 7, 2018
Restaurants | Why accepting cash is so expensive
In my early restaurant days, part of our mission was to ensure the 3 F’s: food, feel and flow. Was the food great? How was the feel/vibe? Was there a great flow through the line and the restaurant? Maintaining these key metrics – and profitability, of course – was the mark of a great manager. One F I hated dealing with? Funds. Managing and reconciling cash at the end of the day was a chore and a headache.
For anyone who’s ever worked in a restaurant or fast food, it won’t come as a surprise that the industry suffers from a sky-high cost of cash. A 2018 study by IHL Group revealed that bars and table-service restaurants had the highest cost of cash of any retail segment at 15.5 percent of annual cash sales. Fast food wasn’t far behind at 11.4 percent. And because restaurants and fast food see high percentages of cash transactions, that means managing cash takes a big bite out of profits.
Some restaurants have opted to go cashless, but consider your options carefully before taking this route. Some of those who have stopped taking cash have found themselves turning customers away, giving away free meals, or taking cash anyway. Cash transactions are common in restaurants (25.6 percent of transactions) and fast food (41.1 percent), so the better move is to manage it wisely by streamlining your cash process from end to end.
Why is cash so expensive to accept? Between food quality, food safety and customer experience, the last thing keeping a restaurant operator up at night is cash, so most restaurants tend to stick with the cash processes they’ve had in place for years. And when you don’t have tight procedures around cash, costs creep up. Some causes are obvious, but others are sneakier:
- Errors due to poor training: Industry turnover topped 70 percent in 2016, making properly training employees on cash handling a never-ending battle.
- Theft at the register: For QSRs, employee theft can amount to 4 percent of annual sales. An intelligent cash drawer, integrated with a comprehensive platform, can track and prevent loss at the register in a busy restaurant or fast food location.
- End-of-day reporting errors: Most restaurants rely on manual reporting methods and use POS data as a single source of truth. Manual input of POS data into reports is prone to error and ripe for manipulation.
- Deposit preparation and transportation: The time it takes to prepare deposits and the opportunity for theft makes them a particularly risky area for restaurants. Transportation adds to the cost, whether you use an armored car service or have a manager drop the deposit at the bank. Deposit tracking lets you see where your deposits are at all times and verify accuracy every step of the way.
You’ve got two priorities for your chain: food and guest experience. Managers are always juggling labor and food costs to ensure the health and profitability of a location. So why worry about cash? Because controlling the cost of cash will give your employees more time to focus on what really matters.
If the management team spent less time in the office counting cash, tracking down unreconciled deposits, and researching shortages, they would see instant improvements in both front- and back-of-house operations.
In the front of the house, managers can better focus on:
- Excellent guest experience
- Food quality
In the back of the house, they can concentrate on:
- Controlling food cost
- Ensuring food safety procedures
- Employee safety and procedure compliance
Every restaurant is looking for ways to pump up their thin profit margins, and controlling your cost of cash is a simple way to lower expenses while giving your employees more time to spend delighting your customers. The next time you’re on site at one of your stores, take a closer look at your cash operations, and you might see the opportunities you’ve been missing.