By Sean Grudzinski, product research & analysis manager
As I’m sure you’ve heard, the penny is no longer being produced. Unfortunately, production costs outweigh the coin’s value, and it has officially been decommissioned. However, according to the American Banking Association, there are an estimated 250 billion pennies in circulation. For the near future,
pennies will continue to be a legal tender, but circulation will decline.
What does this mean for you as a retailer?
Keep in mind this only affects cash sales. It is estimated that cash accounts for 14%-19% of retail transactions, although the percentage is higher for purchases that are in smaller dollar amounts. The shift to purchases using credit or debit cards continues to increase and more retailers will shift to cashless models in the next 10 years.
There has been little guidance for retailers regarding how to manage this penny change; however, more clarity is expected from local, state, and/or the federal government. In the meantime, research conducted by HRG suggests it should be handled at the transaction level. It appears applying standard rounding principles — up or down to the nearest nickel — will be the most common retailer strategy. This should provide minimal impact over time as cash transactions decrease and with the mix of adjustments up and down with the rounding routine.
For example:
$9.21 is rounded to $9.20
$9.22 is rounded to $9.20
$9.23 is rounded to $9.25
$9.24 is rounded to $9.25
We DO NOT recommend changing individual product prices as you only need to round the total transaction after the sales tax is applied for cash transactions.
You may need to work with your POS vendor to incorporate the rounding routine you choose, so it can be programmed for more efficient transactions. If you have a cash register rather than a POS system, consider programming a Quick Key for rounding.
Again, pennies will continue to be valid legal tender and will retain their value, so if you have them, use them.
Hopefully this information helps as you continue to navigate this change. As always, HRG is here to support your efforts to drive profits in your front end.