Every day, thousands of people visit their financial entity to withdraw extra cash for daily expenses. These individual transactions may be small, but when hundreds or thousands of those transactions are made at a branch every day, the total amount of cash dispensed can be a very high sum. But each branch’s daily operations are limited by a fixed cash flow which must be set without prior knowledge of what each customer will require, which creates a challenge for financial entities. Customers simply expect that the bank will have adequate cash on hand, so how can the bank confidently ensure it has enough funds to accommodate customer transactions without keeping too much in reserve?
A quality improvement project team led by Jean Carlos Zamora and Francisco Aguilar at Grupo Mutual, a financial entity in Costa Rica, focused on the amount of cash kept in the vaults to support transactions at 55 branches. Using Minitab Statistical Software, the team examined the cash flow at each branch and determined the optimal cash amount to store in each vault. The team applied data analysis and Lean Six Sigma (LSS) methods to increase cash usage, decrease costs, and free Grupo Mutual to reinvest funds that increased revenue by $1.1 million—without affecting the quality of its client services.
“We found a positive cash balance at 95% of the branches,” says Zamora Mora. “The analysis showed the cash on hand to meet customer needs exceeded the requirements by over 200%, so we suddenly had lots of money to invest.”
The capability analysis for each group revealed opportunity for significant savings and gave the team the confidence to move forward with the Improve phase: implementing real-time control charts that enabled management to view each branch’s cash balance at any point during the day. The charts also included cash limits that were determined by cash flow data generated by customers’ inputs and outputs, as well as the amount of idle money and utilization rate. Managers could quickly identify which branches had excess cash and move it to the branches where additional funds were needed, maximizing the utility of the cash generated without disrupting customer service.
- Financial institution in operation for 42 years
- Employs 900 in Costa Rica
- Operates 55 branches in Costa Rica
- Services include home loans and processing bonds for corporations and individuals
Optimize cash transfers between bank branches to avoid both negative cash flow and idle funds.
Minitab® Statistical Software
- Increased cash usage by 40%
- Reduced remittance costs by 60%
- Increased revenue by $1.1 million