On Monday, February 4, 2013 Canada’s one cent coin will be officially discontinued and this presents certain issues for retailers that must be addressed. A guide for C-Store operators to help your associates understand how to manage this changeover.
Many C-store retailers have been wondering about the demise of the penny and how it is going to affect their businesses. It is an important topic and what follows is designed to help members understand what’s going to happen and how to handle it all.
The federal government extended plans to discontinue circulating pennies to give retailers and small businesses time to adjust after the busy holiday season.
The federal government actually stopped minting new pennies in April 2012 after 150 years and basically started to cut supply of pennies in the Fall.
Most retailers understand that the changeover is now going to happen after the busiest time of the year for retail sales – but nevertheless they still face a transition that is undoubtedly going to be complicated at the cash.
Essentially the plan is this: cash transactions should be rounded off to the nearest five cent increment but electronic transactions using debit or credit cards should still be handled to the nearest penny. That also applies to cheques which can be accepted, written to the penny.
The rounding up or down has to be handled at the cash desk so your staff are going to have to know how to handle this and how to explain everything to customers.
And of course they have to be diplomatic about it all!
Here is a simple example:
A sale of $1.01 or $1.02 would round down to $1.00.
A sale of $1.06 or $1.07 would round down to 1.05.
A sale of $1.03 or $1.04 would round up to $1.05.
A sale of $1.08 or $1.09 would round up to $1.10.
The penny itself can continue to be used in cash transactions to make exact payments or be given in change. Pennies collected can be returned to financial institutions who will return them to the Royal Canadian Mint for recycling.
Products and services can still be priced to the penny which means that cash registers need not be reprogrammed. It is important nevertheless that retailers operate in a consistent, fair and honest manner and be very transparent with their customers as to how they figure each transaction.
HST on purchases will still be figured down to the penny and added to the bill.
Any rounding only applies to cash transactions. It is important that all staff understand this. Consider this simple example: in Ontario if you sell goods for $4.30, $0.56 of HST must be added for a total sale of $4.86.
In that case, if a debit card is presented, the customer pays $4.86.
If the customer offers cash, it is presumed that the retailer will round down the total to $4.85.
There is no doubt that this program to eliminate the penny is going to cause a degree of consumer confusion and reaction. All retailers are advised to make sure that their customers are made fully aware of the situation. We are sure there will be considerable media coverage about the end of the penny and yet, at the local level, it will be a lot easier for everyone if steps are taken to train all staff and communicate clearly with customers about what is happening.
Over time, changes to point-of-sale cash registers will reflect the changeover but initially there will be a transition period as the new “rounding policy” comes into effect. As a “Responsible Community Retailer” you should make sure you clearly communicate the details to all your customers and be consistent in the way you implement the changeover.
It is hoped that all retailers will work this out responsibly and not take advantage of any opportunities that this transition may present.
The “penny-free” marketplace in time will be less complex. It will also save Canadian taxpayers an estimated $11 million annually because it was costing 1.6 cents to physically manufacture one before the government made their decision!
Believe it or not, over 35 billion pennies had been minted in Canada over the last hundred and four years! In 2011 The Royal Canadian Mint produced 660 million pennies alone. That is $6,600,000! So you can believe that there are still a lot of pennies floating around across the country that someday are heading toward the recycling plant at the Mint. The physical penny will not disappear overnight but there will be less and less in circulation.
One very good idea to use up pennies is fast gaining appeal. A number of charity drives are already organizing penny donations for good causes.
You just have to stop for a moment and think of how many people across the land – just like you perhaps – have a few pennies sitting in a jar or a box around your home or even in your car. Gathering them all up for good causes will be a great way for the old penny to be used as a very valuable resource before heading off to be recycled!