Corporate treasurers in the United States, especially at retailers that engage in frequent small-cash transactions, have yet another issue to ask their banks about.

The US Treasury Department intends to stop producing one cent coins, and officials are discussing potential alternatives for the five cent coin.

While not eliminating the smallest coins entirely, the end of new production has the potential to shift some pricing strategies. It raises concerns about the flow of bulk coin between company coffers and the bank.

Corporate treasurers should begin planning now, according to cash management experts.

It costs 3.7 cents for the government to mint a one cent coin, commonly known as the “penny.” Producing the five cent “nickel” costs more than 13 cents.

“This is wasteful!” President Donald Trump proclaimed in a social media post in February.

By May, the Treasury Department was ready with a plan to phase out production of new one cent coins. The department said it had just placed its final order for the metal blanks and would cease minting more pennies after those blanks run out.

Kevin McColly, Chief Executive Officer at Coinstar, points out that one cent coins will still be ubiquitous at American cash registers even after the government stops making more.

“This is not a situation where the penny is going away,” McColly told Treasury Today in an interview. “I don’t think there will be a big impact, as long as there is coin flow.”

Coinstar, based in Bellevue, Washington, is a provider of coin redemption kiosks and cash management solutions. The company handles triple the Federal Reserve’s volume of coins and five times the Fed’s haul of one cent coins.

The last time there was a significant problem with coin availability in the US was at the height of the Covid-19 pandemic lockdowns. What turned into a reputed “coin shortage” was really a geographical supply imbalance, McColly argues.

In recent testimony before Congress, McColly urged the Fed to pay keen attention to keeping coin flowing through the system and to be more transparent. When Americans will need to rely solely on the existing supply of one cent coins, smooth logistics to bank branches would alleviate fears of spot shortages.

“We want to avoid what happened in 2020,” McColly tells Treasury Today. “Everybody in a treasury role is going to want to make sure this doesn’t happen again, because it causes chaos.”

Some officials argue against producing more five cent coins. That conversation has turned to identifying a cheaper metal composition instead. Therefore, cash transactions soon may gravitate towards the nearest nickel instead of the nearest penny.

Robert Triest, an Economics Professor at Northeastern University, says Congress may legislate some aspects of the transition. Congress is considering the Common Cents Act, which would formally end production of the one cent coin and set fair rounding practices.

“It will be important to have rules in place regarding how cash transactions that are not divisible by five cents should be handled, most likely by rounding to the nearest five cents, and also regarding how existing stocks of pennies can be used and exchanged,” Triest explains.

Even if one cent coins become difficult to stock – an eventuality Coinstar’s McColly does not expect – retail pricing will not necessarily switch to the nearest five cent increment. Most retail transactions are either non-cash, or they involve ringing up multiple items at the point of sale, or there is sales tax added.

The key for corporate treasurers is to proactively talk with your commercial bankers and make sure they are in reliable communication with the Fed’s coin depots to procure enough coin and to prevent opaqueness if a disruption is brewing.

“If I am the corporate treasurer at Walmart, I would make sure I have line-of-sight about where the coin is and make sure the inventory is really clear, so I can forecast properly,” McColly suggests.