Who Handles Your Cash?
THE CASH-IN-TRANSIT INDUSTRY, which has been known for decades as the armored car business, now serves a cash management function as companies transport, store, and process billions of dollars daily. Customers consist largely of financial and retail businesses but also include any business requiring the protection, storage, distribution, and management of valuables. Before contracting with a cash-in-transit firm, companies must be aware of the basic features on offer and know what to consider to assess whether the vendor has solid business practices.
Picking up valuables and dropping these valuables at a designated point using armored vans or trucks is the basic service offered by cash-in-transit firms. However, cash-in-transit companies may have additional services available for customers. These extras include cash management, storage, ATMs, safes, and vaults.
Cash management. The cash management service is the fastest growing feature offered by cash-in-transit companies. Cash management consists of verifying, reconciling, processing, forecasting, and storing customer cash and coin in a seamless and transparent manner.
Currency, or paper money, is usually processed in-house by cash-in-transit companies while coin processing is often outsourced by both large and small carriers. Some managers have been known to handle coins in a lax manner thinking that theft is less likely to occur with this product. This complacency has resulted in the theft of millions of dollars. Since many carriers outsource their coin wrapping services, companies should ask the cash-in-transit service about their coin handling and subcontractor vetting process.
Customers should insist on regular auditing of the cash management functions. Similar audits should be conducted periodically for the coin processing function.
I have participated in many internal and external cash audits and strongly endorse audits that include a comprehensive count of the inventory. A good method to use when counting inventories is to conduct joint audits with the Federal Reserve Bank to ensure that all funds are accounted for, including those enroute and stored off site.
In addition, CCTV coverage should be reviewed in the audit; a frequent review of CCTV systems will ensure that usable footage is available when necessary. I have been involved in several investigations where CCTV footage was not available when needed due to system error or poor visibility.
Storage. Storage of valuables normally goes hand in hand with transportation services. However, some customers store items such as gold and silver bars, computer disks, and documents that do not need to be transported again for long periods of time. To properly protect these valuables, a daily audit is required, along with stringent controls to monitor access to storage areas.
Large companies of ten assign an employee to manage the relationship with the cash-in-transit company. I suggest that this manager be reassigned periodically as these employees tend to become too close to carrier contacts, resulting in lax procedures on daily tasks, such as auditing of storage items. The change reduces the likelihood that there will be collusion and also ensures a fair review of the company’s needs when contracts are up for renewal.
ATMs. ATM services are often provided in conjunction with cash-in-transit services. Some carriers provide a full ATM service package that includes the purchase and installation of the ATM, maintenance, cash replenishment, cash processing, and total management of all funds. While this can be a valuable service to the customer, it also creates the most risk for the carrier for several reasons. Money that is normally picked up and dropped off at an end point is handled by several people, resulting in a more complex investigation if funds go missing. The most serious risk, however, lies with the crews servicing ATM sites that are located in high-risk environments.
When selecting an ATM vendor, important criteria to consider include auditing programs and training for ATM technicians. The customer should review carrier policies for reporting shortages and repayment of shortages. The carrier should also be questioned as to how shortages are tracked and investigated.
Electronic safes. Most carriers partner with different safe manufacturers to offer a wide scope of services using electronic safes, which come in various sizes.
These units provide bill validation, shift reports, and daily audit reports for the cash. Reports can also be reviewed electronically via a Web-based system by an owner or manager to evaluate available funds or address shrinkage issues. Some of the units will also dispense coins to the cashier.
Properly managed and used in conjunction with an adequate CCTV system, these safes can substantially reduce theft. Some businesses have eliminated the theft of cash by using the safes. The key to the success of this application, however, is a well-managed CCTV system.
Vaults. A few companies offer stationary vaults, which are usually located inside malls that do not have banks. The mall’s stores use them to obtain change during normal business hours. Cash-in-transit firms can sell this service to retailers at a low rate because the armored crew makes only one stop to gather the deposits and drop off change at the vault. Businesses benefit because they need not wait for the carrier to provide them with the necessary funds to operate.
Though upgrades in systems and technology provide an added benefit to cash-in-transit customers, these features are useless if the fundamentals of the company are shaky. When contracting with a cash-in-transit service, companies should require adequate insurance coverage, a comprehensive training program, and contingency plans.
Insurance. A company should investigate a carrier’s insurance coverage. Even if the carrier is a large, well-recognized firm, due diligence is critical. A review of a carrier’s financial capabilities and an investigation of the carrier’s insurance policy are imperative in the selection process. Some carriers may lack adequate insurance coverage for the size and scope of their operation and others may lack the financial strength to repay a large loss should the cargo policy fail to pay a claim.
Training. Training is essential to a carrier’s success and firms have made considerable strides toward improving their training programs. Many carriers require mandatory completion of classroom training, followed by on-the-job training and ongoing certification.
To ascertain whether training is adequate, companies should ask to see training materials and evidence of instructor credentials; they should also interview carrier employees about their training experiences.
Contingency plans. The most critical part of a contingency plan for a cash-in-transit company is a backup system in case of a power failure. Companies should require that a carrier specify the backup systems it has to ensure uninterrupted service. The plan may be as simple as having backup generators on hand to support operations during power failures. Companies should ensure that no matter what the carrier’s solution, a backup plan is part of the contract.
The objective for carriers and manufacturers of industry equipment is to reduce cash handling and expedite credit for the cash in transit so that it becomes a performing asset. Cash-in-transit firms can provide this service along with other features from vaults to Web-based management systems. However, companies must be sure that vendors have adequate insurance, training programs, and contingency plans before entering into a contract.
Jim McGuffey is the owner of A.C.E. Security Consultants. He has 27 years of experience in management positions with two of the world’s largest cash-in-transit services.