Businesses often find themselves in trying times when dealing with cash deposits. More than 220 million people still rely on cash and cash-based payments. Although about 90% of businesses in emerging markets still operate in cash, banking procedures are yet to be made cash-friendly for deposits at scale. This blog discusses the challenges of cash deposit and what you can do to solve them.

The challenges for Cash Deposits

Cash deposits pose great challenges for businesses and SMEs that are directly reflected on their teams. 

Cash Operations

Once the bulk cash enters the vicinity, millions of denominations must be counted, recounted and accounted for within manual ledgers handled by the cash manager. This may lead to unavoidable time delays to complete cash deposits and is prone to errors.

Storage 

Dealing with cash often means cash collections happening within the vicinity such as inside warehouses, darkstores or offices, which then need to be safely stored overnight – ready for deposits the next day. This often leads to high insurance premiums that take into account the safety and risk of cash at scale. 

Often, if the cash collection within the locality exceeds a certain limit entailed by the insurance policy, this cash needs to be either stored in another location, or needs to be moved instantly. This puts businesses and operations team in a constant state of struggle to safely store and keep regular checks on cash present within the vicinity. 

Logistics

Cash logistics are almost always organised by the business themselves, which includes arranging safe storage spaces, coordinating cash in transit services to move bulks of cash from the point of aggregation finally to the bank for deposits, travelling with cash in transit service providers to ensure reliability in services and so on. Managing the entire lifecycle of cash and coordinating with personnel at multiple touchpoints, creates silos in the entire process. Moreover, for businesses dealing with small denominations, it’s an even greater challenge for them to get denominations accepted at the cash deposit counter. These operations are often labour intensive and equally time-consuming. However, these processes cannot be detoured with traditional cash management systems.

Once the cash arrives at the bank, the cash must then be sorted and counted once again. Any differences arising at the cash counter must then be accounted for – further creating time delays.

Access to Revenue

For businesses, every second is an opportunity. Cycle times for the point of cash collection to actual settlement within the bank take 2 to 3 business days on average. On top of that, the cash deposit process alone occupies at least two-thirds of the day. This stalls businesses from accessing their cash for use. This may include making timely payments to stay ahead of credit terms, or potential reinvesting opportunities to grow their business 

Safety 

Storage of cash within warehouses and transportation of cash from the warehouse to the cash deposit counters located at the bank calls for excessive risk. 

Solution to manage Cash Deposits instantly

Cash deposits need not be so difficult to manage for businesses. B2B eCommerce players such as Jugnu and the leaders of Coca-Cola distribution Unified distributors have been relying on modern cash management solutions. With Cash Deposit Machines (also called Loop Machines) installed in-house within their warehouses safety and logistics is never a point of concern. Moreover, these businesses have outsourced the entire Cash Collection process from the point of aggregation. This means that cash transportation, cash deposit and the risk that comes with is non-existent. Cash Deposits, that previously occupied days of access to finances and deposit procedures, are now processed instantly.

Moreover, businesses such as these have been leveraging on CashWise, the cash analytics platform, that gives a deeper insight into the cash flux and allows management, cash pickups and financing from a single click of a button. 

About Loop

With Loop, your business receives tailor-made cash-first financial solutions. The digital and financial infrastructure allows you to streamline disbursements, automate and digitse cash in real time for any scale. If you find yourself searching for “Banks near me” or “Cash Deposit Machines near me”, Loop is the one that brings your bank to your business. Never leave your doorstep.

Sign-up for hassle-free cash lifecycle management and never worry about cash deposits again.

 

What is a Cash Management System?

 

Cash management is the process of planning and controlling cash flows. However, in banking and financial institutions, cash management is a service offered to corporate clients. This gives businesses access to new financial services, such as payments, collections, and transfers of funds. Not only does it help businesses in reigniting their cash operations, but it also supports businesses with liquidity management – crucial for survival, especially in times of an economic downturn.

However, traditional cash management services, often offered by banks, allow business clients to sign up for the service to manage their cash operations. For SMEs as well as large businesses, this often means physical banking only scaled up. Even though businesses pay hefty charges to manage cash operations, teams and delivery agents are made to personally visit the bank branches and physically deposit cash. Small denominations are often unaccepted in banks, which poses a great challenge for small-scale retailers.

Our article Cash Management System: A Complete Guide explains the process in great detail.

What is the new approach towards cash management?

 

New cash management solutions, such as that offered by Loop, allow businesses to manage their cash end-end with flat-fee and insurance coverage. The holistic approach toward cash management solutions eliminates the need for human touch points, thereby minimising the risk of fraud and errors. Moreover, these services are independent of the volume of cash, which means denominations of every capacity are accepted and deposited in banks in real-time.

What scope does it cover?  

 

The tech-first approach toward cash management covers the following aspects of cash handling and operations

Collections – Allows businesses to outsource cash operations. Collections include rider-based pickups as well as on-premises collections dependent on hardware. This cash is digitised at the point of aggregation and updated within accounts and analytics software in real-time, always keeping relevant teams updated. Automated collections simplify management. This means corporate clients are fast-tracked and banking services remain available 24/7, whether in cash collections, deposits or availability and access to hard-earned finances.

Disbursements – This allows businesses to transfer payments from one account to another business. This includes automated cheque clearing, IBFTs and corporate payouts. Advanced solutions allow businesses to clear corporate cheques and issue transfers in real-time through a single cash management platform.

Do I need a financial solution for my business?

 

A cash-native financial solution is essential for businesses that are cash-dependent. Advanced business-focused solutions have the capability of offering services based on financial needs. This goes for:

• Businesses operating in high volumes of cash, that would require on-site cash deposit hardware and cash in transit services. This includes distributors, b2b eCommerce platforms, textiles, explained in detail here.

• Businesses with low volumes of recurring payments that require automated collections, such as educational institutions, gyms or hospitals. 

How can this improve my business?

 

• On-demand cash deposits – Businesses need not stress about completing collections or deposit within banking hours. Cash management solutions allow small- and large-scale businesses to complete deposits at any time of the day.

• Productivity – Delivery agents can optimise routes based solely on drop-offs, increasing the number of customers served within a day. Outsourcing cash collections eliminates the responsibility of collection and deposit – easing the already tight schedule of delivery agents.

• Instant Access to Revenue – Real-time and on-site digitization of cash means an ease of access and availability of finances, reducing the need of daily working capital.

About Loop

 

With Loop, your business receives tailor-made cash-first financial solutions. The digital and financial infrastructure allows you to streamline disbursements, automate and digitse cash in real time for any scale. Sign-up for hassle-free collections and disbursements.

What was once a siloed business unit, digital transformation in finance continues to blur the lines between Business and Financial strategy. 56% of organizations in Europe are keen to invest in embedded finance to boost their ability to grow revenue. Finance teams are in fact gatekeepers of critical information that inform decision-makers and stakeholders about a company’s financial stability and in turn, drive businesses’ critical decisions such as equity investments and opportunities for expansion. It would therefore only make sense for financial teams to be fully equipped with market forward trends.

 

Digital transformation in finance leads on three main fronts

 

   1. Capturing data – Simplify data capture for your financial database. Meaning data entering and out of the system should be seamless, to minimize errors and rework. Diving deeper into digitizing data capture could mean API-driven workflows – that allow teams to continue using software of choice but minimize or even eliminate cumbersome data migration processes.

   2. Processing – 77% of firms fall behind in terms of automation in finance, while 56% of firms believe in the correctness and accuracy of financial data. This means that institutions currently continue to rely on manual processing for data accuracy and completeness. However, once again, these processes are to be simplified and managed through automation. This includes reconciliation, automation of collections, and payments amongst many others. 83% of respondents in firms believe that data processing and in particular, month-end financial closing processes should be automated as a priority.

   3. Analytics – Implement a single source of financial analytics and real-time reporting for a company-wide view. Data leveraged through finance teams can be pivotal for C-level executives in driving profitable decisions, understanding cash flows, cash leakages, and business intelligence in general.

 

How does digital transformation in finance make a difference?

Digital Transformation in finance involves a holistic approach to financial management that revolves around the use of innovative digital technology. This digital technology involves the use of automation for end-end processes to eliminate human touchpoints and manual heavy lifting. Furthermore, this may also include analytics and intelligence that enables businesses to drive key business decisions.

Financial analytics and intelligence are building blocks for strategic plans and decisions, especially for sales, order fulfillment, customer demands, and supply chains. Not only do they help us with future trends or predictive analytics – but digital transformation is also essential to analyze volatile market trends.

 

What are the key trends to look out for?

 

1. Automated Finance 

Finance functions will continue to become automated, especially in terms of analytics and reporting. This will help finance teams collaborate with multidisciplinary teams across the board. Moreover, COVID-19 has pushed businesses to speed up digital transformation. 60% of finance teams reported a great advancement in Digital Transformation.  In South Africa alone, SMEs have accelerated to an adoption rate of 43%  for fintech in financial management.

2. Real-Time financial cycles

As finance becomes real-time, with automated reconciliation and settlements, financial cycles will soon become obsolete. Monthly, quarterly, or yearly close will soon come to an end and stakeholders will have access to real-time financial data. Moreover, stakeholders will continue to find value in operational data on the go.  Traditional cycles will soon become unnecessary as reported in Deloitte’s Finance 2025 report.

3. Data – APIs

API-driven workflows will soon become a norm as finance heads towards digital transformation. This means data will soon become interoperable across enterprise applications, making it easier for businesses, business units, and banks to share data, analytics, and insights across channels. As easy as the word “integration” sounds, this will require excessive efforts from organizations and business leaders to push data migration and clean-ups at a company-wide level.

 4. Finance professionals’ transformation

Finance leaders will soon transform into data scientists and business analytics experts who advocate change towards digital transformation. Data analytics and data science have become the second most demanded skill for top hires in fintech as of 2019, which is only likely to grow. Banking, Financial Services, and Insurance (BFSI) has become the top industry for data scientists. This trend speaks leaps and bounds of where the financial space is heading in the future.  

5. Embedded Finance

55% of non-financial businesses are planning to offer embedded finance services within the next two years. Embedded finance has been a catalyst for consumers over the past few years, with retailers beginning to offer buy now pay later (BNPL) services. However, embedded finance doesn’t end there. B2B embedded finance is flourishing especially in terms of B2B lending. As demand for financing from SMEs continues to accelerate, the embedded finance industry will continue to grow.

For SMEs and business owners, embedded finance will open opportunities in terms of access to financial resources and opportunities for funding – something that was earlier out of bounds.

 

About Loop

Loop is building out physical and digital infrastructure to allow businesses to completely automate the cash to digital on-ramp. Loop’s platform enables digital payments from physical cash in real-time. Find out how Loop can help your business grow and stay ahead of top financial trends.

What’s the one thing that makes startups work differently? They strive to survive – which makes cashflow management one of the core goals of the business. Over the years, we have seen several startups and small-scale businesses eventually go out of business or take an exit from the market. Why does it happen, and why does it happen more likely to startups? Is it the lack of funding, or lack of belief from investors to take on a challenge that disrupts the status quo? No – it’s not. According to CB Insights, several well-funded startups with investments of over $1M eventually ran out of business. When they uncovered why it happened, it turns out it was mostly because of 3 prevalent reasons where cashflow management stands as on the primary:

• Cash Flow Mismanagement

• Financial Frauds

• Being hit by the pandemic

Small scale businesses exit when they run out of money. But it doesn’t have to be this way. Effective cash flow management for businesses can help them thrive through the highs and lows of market fluctuations, whatever the case may be. Here is a compilation of the top 3 tips for cash flow management, specially curated for startups.

Cash Flow Management 

 

Know where your cash goes and stay on top of book-keeping

As the owner of a startup, you’re most likely to consider your startup as your brainchild, and it only makes sense to stay on top of the whereabouts of what keeps it running. This is where cashflow management should come into play. Firstly, yes it happens to be you and your team that runs the business, but it’s cash that keeps the blood pumping. Know how your cash is performing, where, how, and when cash is entering and exiting your business. One way to do it is to reconcile accounts daily – so you’re aware of the whereabouts at the end of each day. It’s best to invest in error-free automatic reconciliation and save valuable time and resources.

How does it help? It helps you in understanding what profitable accounts to focus on, and which accounts are leaking cash. This will help you manage your businesses with clearer ideas in mind and streamline your focus on cash profitability and positivity.  Having organized accounts will help you establish a bird’s eye view of your business and help you prioritize and understand your goals and milestones and play as a red flag, warning you before time when you need to pivot or source a new MVP into the market. Messy books consequently lead to a messy business

Establish spending habits and rules

An article published by the Silicon Valley Bank talks about establishing habits and rules to manage cash effectively. But what can these habits be? These spending habits and rules should require staying updated with cash documentation – this includes receipts and deposit slips. This will help you establish a vigilant eye on all incoming and outgoing cash, so managing accounts close to month-end is no trouble for your finance team.

Establishing spending rules also helps businesses cut down frauds or minimizes room for errors since each transaction is recorded and maintained. It is best to invest in cash management software that helps you manage detailed account information in one place.

Minimise the cash conversion cycle

Turn inventories into cash as quickly as possible. Although businesses hastily work on collecting receivables, they often seem to miss out on the opportunity that comes next – converting that cash into cash available for reinvestments. For startups and small businesses, it is essential to have cash available for investment opportunities to fight the tide, iterate with market trends and compete with bigger sharks. Accelerate cash to digital conversion so finances are always an asset. Automating the cash collection process is one of the ways to do this – which counts cash and settles it within your bank account almost instantly, without having to wait for days. This helps businesses focus on reinvestment, and growth and stay ahead of credit terms – making investments and payments easier.

An easier way to manage cash

Loop is helping startups manage their cash with easier book-keeping, reconciliation, and instant cash conversion so businesses can focus on growth – and that’s what’s important. Simplify operations with simplified cashflow management. Chat with us and find out how we can help – it’s that simple.

Working capital management is a benchmark for businesses, with especially Startups and SMEs struggling to find the balance. It is an essential metric in measuring the long-term financial health of a business. Working capital management involves a business strategy that ensures the operational efficiency of a company by monitoring and using current assets and current liabilities effectively. This means that maintaining a positive working capital can pay its bills and invest in growth opportunities. Finance teams work relentlessly to work on striking the right balance for working capital. Here is a list of industry best practices: 4 tips for startups and SMEs to manage working capital efficiently.

Reduce Inventories

Inventory management is an important factor in making the most of working capital. Inventories can pose an excessive burden and lock cash resources. However, maintaining an insufficient inventory may result in loss of business opportunities. The goal of any business should be to manage optimum inventory levels, to avoid procurement costs, storage costs and cost of insurance. Invest in forecasting the true demand, and optimize logistics, warehousing, and safety stocks.

Streamline Vendor Payment

Vendor payments are the payments to external suppliers and vendors for goods and services provided to the organization. Vendor payment compliance is one of the key factors in improving working capital. It’s vital for businesses to improve payables performance for maintaining healthy relationships and negotiating deals and discounts for bulk buying in the future, if need be. Although vendor payments seem counter intuitive to maintaining working capital, maintaining a high reputation is likely to save up cash in the longer run.

Optimize Receivables

Optimizing the accounts receivable function can help free up cash and further improve working capital. Invoicing and billing plays a major part in improving the overall process. One way to achieve process optimization is to automate the process – reducing the time and effort required, and eliminating the risk of human errors. Moreover, electronic billing systems are able to significantly reduce the delivery time for invoices.

Carrying overdue accounts receivable and passing over payment terms result in a loss of growth opportunities that your business can essentially invest in.    

Shorten the Cash Conversion Cycle (CCC)

Managing payables and receivables effectively directly shortens the cash conversion cycle. The shorter the cash conversion cycle, the better the business is at selling stocks and recovering cash from sales, all while complying with supplier payments. Aside from payables and receivables, the cash conversion cycle can further be reduced by investing in automating the cash collection process. Deloitte recommends implementing a cash collection process to enhance visibility of real time cash flow. This further strengthens the process collection process. Moreover, instant cash to digital conversion further eliminates the time required to make cash resources available for growth and investment opportunities.

Focus on Reconciliation and Settlement

Reconciliation and settlement is the basic building block of enterprises. Early stage startups and SMEs lose about 5% to 20% of invested capital as friction in reconciliation and settlements. How so? Over invoicing vendors and often under invoicing receivables causes the startup to quickly burn out cash. Very often, businesses deal with unnoticed frauds and thefts originating from the customer side, as well as from within the business. It is only necessary for businesses to invest in performance enabling operations of an organization. Automating the reconciliation and settlement process eliminates these frictions, reduces the cash burn rate stemming from reconciliation and settlement, and maintains complete transparency for businesses on every end.

Loop’s solutions help Startups and SMEs in managing their working capital, through complete automation and accessibility of cash whenever and wherever needed. Our end-to-end cash management solutions from collections, to tracking and reconciliation – minimizes the cash conversion cycle, reduces excessive cash leakages and helps businesses manage their working capital efficiently. Get in touch with us to get started. 

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In this blog: Learn about the lifecycle of cash on delivery, it’s implications and how the entire process of cash on delivery can be optimized.

E-commerce across the globe surged to a peak ever since the pandemic – with e-commerce startups, quick-commerce solutions and online retailers experiencing an overwhelming growth. The e-commerce share of global retail trade experienced a growth from 14% to 17% in just a matter of three years since consumer behavior shifted towards online shopping. Although COVID-19 induced a digital friendly realm, consumers continued to vouch for Cash on Delivery, over any other digital payment methods. Consequently, existing businesses as well as new entrants in the e-commerce sector continued to – and still continue to establish Cash-on-Delivery (CoD) friendly business models. Why? To gauge revenues and engage with customers.

Understanding the CoD Supply chain

Although businesses strive to accept cash on delivery, whether it be B2B or B2C, however many are yet to optimise their systems. Understanding how the CoD supply chain works is pivotal to understanding how businesses may optimise it. Let’s try to articulate the different touchpoints that come along the way in CoD.

The customer makes a purchase for a good and prefers to choose the CoD method of payment. This means that the customer can purchase the good before a monetary transaction from their wallet.

When the shipment arrives, they receive the goods and make the payment to the delivery executive.

The delivery provider can be a third party logistics provider (mostly used for small scale businesses) or for players such as Amazon, Alibaba, Daraz the company has their own logistics fleet. In case of a 3PL provider, the delivery executive receives payments from multiple buyers. At the end of the day, or after a certain significant amount is collected, every delivery executive makes a run back to the delivery manager – located within a hub. Here, the delivery manager receives cash collections from all of the delivery executives operating within the vicinity and reconciles the cash collected against all the orders. In some cases, cash is accumulated by the 3PL logistics provider over the course of a few days, after which the logistics provider requests for cash to be transferred from the hub to the bank – in a guarded and secure vehicle. Once again, the cash is counted at the bank branch and any discrepancies found in the denominations or the amount, are accounted for within the bank. Once resolved, this accumulated cash is then transferred to the 3PL logistics providers bank account – which then makes the payment online via bank transfer, which may take a few days to reach the supplier or retailer.

In case of a private fleet logistics fleet, the touchpoints remain consistent throughout the process, but the cash deposits are then directly made into the retailer’s or supplier’s account.  

Suppliers and CoD service providers

Although suppliers enjoy the benefits of offering a flexible Cash on Delivery service, and may be extending their hands to reach higher margins, at the same time businesses incur the cost of cash on delivery.

Firstly, the manual cash on delivery process as explained above has multiple human touch points, with cash being transferred from one point to the other with manual entries and settlements. This gives room for human errors, in counting, re-counting, and reconciling. Frauds and discrepancies that may arise as a result of human dependent touch points. This negatively impacts the suppliers, as well as the 3PL service providers since they two parties bear the cost.  

Secondly, for suppliers, the settlement time – from the time of order dispatch up until the amount reflects in the bank account, may take a week or sometimes even more, impacting the working capital cycle.

The Advantages of Cash on Delivery

Cash on delivery opens new avenues for businesses to operate with flexible channels, and also reach to customers that are technology averse. It unlocks the potential for businesses to operate in multiple market segments.

On the other-hand, businesses are able to offer better services to customers. CoD is a convenient payment method for cash based economies of developing countries. For instance, cash on delivery is preferred in Pakistan because of a number of underlying factors – customers can leverage greater control over the buying process, and feel a greater sense of security. 

How to Optimize Cash on Delivery

To continue operating in cash dependent economies, it is essential for businesses to appease customers with cash on deliveries – however, the CoD process doesn’t necessarily need to be complicated and error prone. Automating the process is one way of achieving ultimate optimization and simplifying the CoD process. How do we do that with Loop?

At Loop, we realized the major barriers in managing cash on deliveries:

– The impact of delays on working capital – particularly for startups and small businesses is crucial. Limited access to money while awaiting account settlement, may take days or weeks, consequently increasing the operating capital cycle for businesses.

– Manual cash operations at hubs and warehouses, with one personnel, counting, recounting and reconciling cash from multiple deliveries and orders.

– Storing cash securely within the business’s premises

– Managing the movement of cash from the Hub/warehouse to the bank with efficiency, safety and security. This involves manual coordination with cash in transit service providers.

However, it doesn’t have to be this way. Loop offers businesses automated cash collections, storage, and transfers – to eliminate manual touch points, allow businesses to access revenue instantly and request for secure cash transfers – all through a single platform. API driven workflows make the process simple, quick, and efficient. It’s as simple as that! With completely integrated payment solutions for platforms – optimize your CoD operations and get in touch with our experts!

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In this article, we’ll share a complete 360-degree overview around cash management systems – a complete guide from us, answering the key questions – WWWH, what are cash management systems, why are they needed, who needs them and how can one implement cash management systems in their businesses. If you have been on a hunt for these answers, look no further! You’ll find your answers right here. 

With the rising trend in digital payments, economies are striving to move from cash to cashless. However, cash isn’t going anywhere anytime soon. Businesses and consumers still may prefer it for reasons. Since cash is here to stay, it would make sense for businesses to investigate cash management systems and strive towards making the process simpler, efficient, and effective. But before investing into a solution, let’s try to break down cash management systems and dig deeper into what they really are, in their true essence. 

What is a Cash Management System?

A cash management system is a fully automated solution that manages cash end-end, starting from the physical cash collection all the way up to reconciliation. It is a process of managing cash inflows, outflows and is used to manage, track, and forecast corporate cash flows. All the functionalities of a complete end-end cash management system happen through a single platform to enhance the experience of managing cash at scale. It minimizes human touchpoints and eliminates margin for error – a pain-point most often observed in traditional approaches to cash management. 

The key components of a Fully Automated Cash Management System 

Now that we know the context of a cash management system, we will now try to break down what makes up an effective cash management system. A cash management system consists of two parts, the first being hardware. 

Hardware

Cash management hardware is the physical touchpoint for cash such as a cash deposit machine – that fully automates cash counting and its storage. It uses the Internet of Things (IOT) to fully replace the error prone, manual processes of cash counting, verification and even bank deposit. The cash deposit machine (CDM or sometimes also referred to as a Reverse ATM) is an inhouse machine dedicated to handle corporate cash for the business. It serves as an inhouse bank that works 24/7. Cash deposit machines are robust solutions for accurately counting and recording cash at a point of entry. 

Hardware isn’t all there is for a comprehensive cash management system solution to work effectively. Besides the hardware, a cash management system requires quality software to work in parallel. 

Software

Having the right software is essential as the software helps in tracking, forecasting, reporting, and managing corporate cash flows. The right software serves as the eyes and ears for liquidity management in an organization. From  visualizing reports to efficient reconciliation at the end of the day, the right software helps you go through the entire cash lifecycle as effectively as possible. For some organizations and startups, a cash management software can also mean API driven workflows that can easily be integrated with any ERP and accounting software, automating transactional processes and making them transparent. 

Why is it required?

Now that we understand what a cash management system is, why do we really need a corporate cash management system in the first place? 

● It empowers organizations with data visualization capabilities and boosts accounting transparency.

● This in turn facilitates liquidity management within an organization, reducing the working capital cycle by reducing the cycle time from cash-in hand to cash in the bank, and providing cash forecasting capabilities for improved liquidity planning. 

● It eliminates time consuming processes such as cash counting, recounting, manual ledger entries, and physical visits to the bank for cash deposits. 

● Automating the cash cycle means eliminating the chance of human errors, and thereby eliminating the risk of frauds and discrepancies within an organization. 

Who needs it?

A cash management system is an integral strategic move particularly for SMEs and startups that require agile environments. For businesses that strive for growth and scalability, and are on the constant move towards digital, an operational cash management system helps in freeing up resources to focus on growth and investment capital.   

Cash management systems are also essential for growing businesses that are currently scaling up with increasing volumes of payments and data for cash-based transactions.

How to implement a Cash Management System?

To have a solution tailor made to meet business goals, it is vital to pair with expert service providers that understand your needs upfront, and empower your business with the right advice and tools to unlock your potential. Loop is the digital on-ramp for cash. We provide cash management and multimodal payment solutions for businesses day in and day out. Our API driven workflows allow businesses like yours to seamlessly integrate with internal systems that are already in place. Interested in discovering more, talk to one of us and we promise you the best answers.

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In this blog: What are the hidden costs of cash for your business and what must be done to resolve them.

Cash remains the most relied vehicle for transactions in developed and emerging markets. Although with advancements in fintech, economies are championing transformations from cash to “cashless”, cash still remains to be the backbone of finance, with over 80% of the transactions being conducted in cash. Several businesses across the globe choose to or are forced to accept cash payments, either because of privacy, security or reliability. Paper based transactions cause friction costs resulting in 5 to 15% of all cash lost in managing and handling. For cash dependent emerging economies, it is vital for businesses to work around cash and eliminate such costs of cash. It comes with major hidden costs, which may grow out of proportion if left unaccounted. But what are the costs of cash for businesses? 

Operational Costs

Cash leads to undetermined operational costs which may also grow exponentially with the growth of the business. Cash also adds to reconciliation costs – involving human personnel to count, recount, account for cash in and cash out at the end of each working day occupying human resources and inhibiting their productivity. With the growth of the business, the business would either need to allocate a greater amount of work hours for manual cash management or invest in a resource to keep the productivity up to speed. Businesses also incur the hefty cost of secure cash transportation (or cash in transit) for deposits or rely on employee direct deposit for smaller volumes of cash. These operational costs tend to rise with the growth of the business or when dealing with larger volumes of cash.

Loss Prevention Costs

Handling cash means carrying a constant risk of handling cash, managing discrepancies, frauds, and counterfeits, as well as the risk of life for personnel carrying and transporting cash at the beginning or end of each business day. This loss prevention cost accounts for an increase in insurance premiums that businesses inevitably must pay every year.

Opportunity Costs

Cash at hand accounts for a liability, preventing businesses from investing in scaling up their businesses accounting for a lost growth capital – when cash is in hand but not in the bank. The journey from cash in hand to the bank may take several days before being reflected digitally. The cash conversion cycle (the amount of money tied up, preventing the business from investing in growth) for businesses dealing with cash goes uphill. Consequently, a longer cash conversion cycle would mean a detrimental growth in the working capital cycle, making businesses unable to invest and finance in new opportunities thereby accounting for opportunity costs solely because of paper based money being tied up. Freeing up this cash would mean shifting the focus towards meeting business goals and succeeding in scaling up the business every day of the week.

Eliminating Hidden Costs of Cash

Besides the social costs of cash and the costs of cash imposed on individuals, a broad array of costs encompass cash payments which individual businesses incur. These costs otherwise remain hidden.

Loop offers solutions to businesses and SMEs to mitigate such costs. Particularly for startups and SMEs in emerging markets, Loop enables businesses to accept cash with no compromise. Loop is the digital on-ramp for cash, making it simpler for startups to stay afloat all while managing large or small volumes of cash. Free up resources, costs and downtime with Loop and grow your business!

Talk to us, not to a bot – we promise to make it worthwhile.

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In this blog:

We discuss how businesses relying on cash as a primary form of transaction burden economies, its implications on society and why it’s vital to solve it and what steps we must take to transform them as businesses. Your business has a far greater impact than you think! Find out how cash impacts the economy and society at large. 

Developing economies rely heavily on cash, even in the post pandemic period. The vast informal economy of developing countries relies on cash to sustain itself. We may have arrived in the digital age however; people seem to believe in the tangible – what is around them. Cash in circulation is growing around the globe, where 80% of the worldwide payments continue to be cash transactions. Currency in circulation rose by 40% in Africa from 2011 to 2016 alone. While Pakistan alone faced a 10.4% increase in cash in circulation as compared to that of last year. Although governments across the globe have taken aggressive initiatives to counter the rising flow of cash, the digital divide – particularly in emerging economies, has forced consumers and businesses to accept cash as a primary form of transaction.

Consequences of running cash-based businesses

Despite innovations by fintechs, to move from cash to “cashless” economies, the appetite for cash remains evident around the globe and particularly in emerging markets and developing economies, what is known as EMDEs, where cash has become the main vehicle for retail payments. While driving the underlying risk and drawbacks of handling cash at businesses, it impacts the economy to an equal or to an even greater extent, stagnating growth of the economy. According to an article published in Harvard Business Review, “There’s an assumption that cash is best when money is tight” even though it may be untrue. 

While societies progress towards instant mobile payments, and on a bigger scale, to blockchain and a decentralised banking system, these methods of cash reliance deploy economies with greater challenges. For individuals, cash imposes a regressive tax, where unbanked individuals pay 5 times higher to access their money as compared to those registered on formal banking sectors.

Cash economies also pose a higher risk towards tax evasion. Every year, just African countries lose about $50 billion in taxes – which is more than the amount of foreign development aid that they receive, while the United Nations Economic Commission for Africa (UNECA) puts an estimate to a much higher $100 billion lost in taxes. If even 20% of the underreporting is enabled by the cash economy, Africa loses about $20 billion a year in terms of taxes, creating social implications for the country – in terms of health care systems, transportation infrastructure and standards of living.

The vast majority of the costs of cash, because of those lost in taxes, is borne by society at large – creating a vicious cycle. While developing countries rely on the usage of cash for daily transactions because of the lack of resources created by the digital divide, the digital divide promotes the use of cash while the use of cash continues to nourish the same.

Role as decision makers

For economies to break the leash and move forward, decision makers – constituting of small-scale business owners to multinationals must take a step towards creating a digital friendly financial ecosystem as corporate social responsibility. As much as this change would help ease the oblivious cash management implications engulfing businesses and deteriorating their growth, it would create a bigger and better impact. Supporting the economy and playing a part in creating inclusivity and social justice on a national scale.  

How Loop can help

Being user-centric, we understand cash-based transactions are vital for SMEs to run businesses and maintain client dealings. We’re the “digital on-ramp for cash” – as a business you get the ability to accept cash, without going through the hassles of management. Keep your processes transparent to improve visibility, avoiding internal and external discrepancies, eliminating reconciliation costs and improving the working capital cycle. We’re helping businesses automate and digitize cash based transactions – enabling them to focus on scaling up their business and eliminating the impacts of cash. We’re here to help you mitigate cash based implications, chat with us today!

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Have you been thinking about applying for Loop, but not sure what we have in store for you? We know looking for a new startup online can rather be a challenge, so we decided to make it easier for you. Here, you can find out what careers at Loop have to offer, and get to know about us, our team and the best part – our culture, which makes us different.  

Who are we?

Loop is a fintech startup which is helping businesses across emerging markets to accept cash, with no compromises: building out a unique platform that merges physical and digital infrastructure to allow businesses to seamlessly digitise their cash wherever and whenever they need to. We’re called the Loop since we bring banks closer to businesses seamlessly. We realised that cash management was a potential unsolved struggle with businesses across developing markets, and since the past one year, we have been working aggressively to solve it. We initiated the startup with a small team with big ideas.  What started off as an office with 3 employees with immense passion and drive, has now transformed into a start-up of more than 30 people, located all throughout the globe – and there’s no stopping. 

This immense growth within one year is owed to the businesses that believed in our tech-first approach, but more so because of the people that make the biggest challenges seem easy. We’re an agile start-up that makes quick decisions and deeply believes in consensus. We move ahead with creative solutions when we’re all on board together – just as it should be. Every individual contributes to our brainstorming sessions, discussions and meetings – from the CEO to the new recruit that joined the team a day prior. 

We are different!

We like to work differently. “With Great power (to revolutionise finance) comes great responsibility”, so we’re always on the lookout for great ideas and undiscovered areas of opportunity because we know that the finest ideas come from a fresh perspective. Ideas may seem ambitious at first, but together, we achieve them. We make the innovation process quick – leveraging on our flat hierarchy. When we say we believe in teamwork, we mean it. Everyone on our team is approachable, whether it be walking to their desk, or sending a wave on discord. We’re always there. We rely on collaborative work and make sure we’re backing up every individual to exceed their potential. Every day, when we walk out of our office, we know that we’ve made a change. Careers at Loop are set to make an impact!

If it sounds overwhelming, don’t worry because we might be everything but a regular finance company. You should watch out, because when it comes to games, we’re competitive! Whether it be table tennis at lunch time, or after work chai hangouts or basketball Sundays, we make sure we give it all – because that’s what we do best! Not to forget, our cosy lounge and our mini coffee bar within the office is meant to make everyone feel more at home, and that’s exactly what Loop means to us – home.

If this is something that excites you, we’ve got a place for you. All you have to do is reach out to us. 🚀

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