PAYMENT-HANDLING COST CUTS OUTLINED

MARC MILLSTEIN

CHICAGO -- There's not much choice any more about whether to accept a wide range of payment options, including credit and debit cards and checks, despite added costs.

But there are quite a few steps retailers can take to minimize the processing, handling, labor, bank charges and other costs inherent in customer payment transactions, said speakers at a workshop at the Food Marketing Institute's annual convention here last week.

According to an FMI benchmarking study released earlier this year, the main areas of costs involved in various payment transactions are "tender" time (the amount of time it takes the supermarket employee to conduct the transaction), bank charges, backroom transaction expenses and other direct costs, such as check losses and credit returns.

There is little retailers can do to reduce tender time. But they can find many ways to cut costs significantly and boost efficiencies, whether in handling cash, checks or credit, in the other areas, speakers said.

"For one thing, we are looking at the number of times we are handling cash in our stores. We have made significant progress in implementing an envelope-handling system which has helped us cut down dramatically on the number of times we handle and count cash in our stores before depositing that money in a bank," said Ginny Miller, vice president and treasurer at Vons Cos., Arcadia, Calif.

Under the new system, when money is withdrawn from a register, it is counted and then sealed in an envelope "and is not counted

again until it reaches the bank," Miller said.

Such a switch may not sound like much, but it has had an impact on eliminating unnecessary employee handling in Vons' stores, she said.

"Every time you have another employee handling and counting cash, you are also introducing another chance for errors," added George Hood, director of banking services at Wegmans Food Markets, Rochester, N.Y.

Preventing check losses was another area cited by speakers at the workshop, titled "Benchmarking Comparative Payment Methods -- Costs and Case Studies."

Mike Wheeler, vice president and treasurer of Hy-Vee Food Stores, Chariton, Iowa, said his chain has introduced a computerized system to track frequency of check transactions by individual consumers at its stores. Doing so helps prevent a customer from cashing bad checks at several stores in a short period of time.

"Our system keeps check on the velocity of checks being cashed in our stores. It is a personal computer-based system that we bought from an outside vendor that allows us to check on [checking transactions] every 15 minutes. It has helped us cut down on check losses considerably," Wheeler said.

Vons, for its part, is now using an outside source to screen initial check-cashing applications by customers. According to Miller, using an outside firm to screen out customers who might be bad risks for check-cashing privileges has cut down on losses.

Wegmans' Hood said retailers can keep files on customers to monitor checking behavior and guide them in deciding on spending or credit limits.

Wegmans also charges fees for checks returned due to insufficient funds. "We go after it," Hood said. The chain found that if a problem with a "bounced" check occurs, it is better to take steps to retrieve the money as soon as possible. "The sooner the collection process starts, the higher the likelihood of success," he said.