Date Added: Mar 2010
Excess cash at a bank branch is a potential income loss. However, inadequate cash can cause a "Cash-out" situation. Cash allocation plans are finalized at the beginning of the month, and changes are costly and might not be feasible. This paper describes an optimal cash allocation plan that minimizes expected End-Of-the-Day (EOD) cash holding at branches, subject to constraint on expected withdrawal rate and buffer cash level. SAS Enterprise Guide is used to develop regression models to predict cash withdrawal and deposit. Expected EOD cash holding at a branch is estimated from the forecasting solution for a given cash allocation rule.