A management action research on improving cash management through maintaining an adequate cash level in the branch network

• Main Author: Lao, Monica Therese L.
• Format: text
• Language: English
• Published: Animo Repository 2016
• Online Access: https://animorepository.dlsu.edu.ph/etd_masteral/5256
• Institution: De La Salle University

The Remittance industry has been experiencing a declining growth; and Western Union, one of the largest international players in the market, has been making efforts to compete head-to-head with other remittance agents. In the Philippines, Western Union has been reducing its service fees and has been actively promoting its domestic money transfer through TV commercials (TVC) and radio promotions. eBusiness Services, Inc., one of the largest Western Union agents in the Philippines, has been greatly affected by these efforts; thus the Company has focused its attention in diversifying its revenue stream and in reducing its cost component. One of the largest current assets of the Company is cash the Company's inventory. The retail stores were keeping too much cash inside their vaults to be able to accommodate the customers demand for cash. However, similar to a merchandise inventory, cash in its simplest form is expensive because it does not earn anything unless otherwise invested in the market and is just taking up space inside our vault. To improve the cash levels in our retail stores, the Company decided to centralize cash management with Treasury. The Company envisioned to maintain an adequate level of cash in its retail stores by balancing the opportunity cost of capital and the benefits of keeping excess cash inventory. To do this, the Company went through development stages adopted from the Asian Bank Research's Key Building Blocks of an Integrated Cash Supply Chain. The Company focused on creating its forecasting method to reach the adequate level of cash. Using Kotters 8-Step Change Model as a guide, we implemented the centralized cash management system. Initially, it was decided that an adequate cash level was one days worth of transactions. Upon implementation, it was found that cash level was not only affected by average transactions. It was also affected by certain factors such as frequency of replenishment, volatility of demand and delay in replenishment. Most importantly, continuous communication served as the best intervention to significantly improve cash management. Various meetings and interviews were held to share insights. Through constant communication, there was a clear understanding of the Company's transactions and an access on real-time cash levels of the retail stores.