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Dayton
Business Journal...
Report:
postal cuts may cost businesses $100M annually
by Susan R.
Miller
Thursday,
January 5, 2012
Plans by
the U.S. Postal Service to do away with next-day delivery of
first-class mail
could prove costly for America’s large companies.
A new
report released by REL Consulting, a division of Miami-based The
Hackett Group,
suggests the lag time created as a result of the cuts could cost a
typical
large U.S. company up to $100 million a year by making it harder to
quickly
collect payments from customers
Last month,
the U.S. Postal Service said it would eliminate next-day delivery of
first-class mail as part of a move to close about half of its nearly
500 mail
processing centers nationwide. It also would cut about 28,000 jobs. The
agency
is looking to find $20 billion in annual savings by 2015.
“With the
dramatic decline in mail volume and the resulting excess capacity,
maintaining
a vast national infrastructure is no longer realistic,” Postmaster
General
Patrick Donahoe said in announcing the cuts.
The agency
lost $5.1 billion last year, and is projecting a $14 billion loss this
year.
USPS has
had a rough time lately as competition from carriers such as FedEx
Corp. and
United Parcel Service
, e-mail and the
decline of regular first-class mail has put the squeeze on it, as well
as
expanding costs and the $5.5 billion Congressionally-mandated health
plan
benefit.
The study
notes that more than 60 percent of all invoices are still delivered by
mail, and
that typical U.S. companies take more than five weeks to collect
payments from
customers.
If next-day
delivery is eliminated, the report predicts it would add at least two
to four
days to the collections cycle for many companies, which would
“potentially
increase Days Sales Outstanding (DSO) for many companies by up to $100
million
annually.”
“Companies
need to get ahead of the game, and measure float now in areas like
mail, bank
clearance, and payment processing,” the report notes.
The report
suggests companies take the following actions before next-day delivery
is
eliminated:
• Bill more
quickly or consider sending bills via email. However, always follow up
to make
sure the bill was received;
• Make
proactive collections a priority. Segment your customer base to better
understand where collections problems are, and where the best
opportunities for
improvement lie;
• Encourage
payments via electronic means, such as using an automated
clearinghouse, wire
or debit/credit, starting with those customers accounting for the
majority of
revenue;
• Measure
float now in areas such as mail, bank clearance, and payment
processing. “This
will enable them to set reasonable improvement targets,” suggests
Veronica
Heald, REL global customer to cash practice leader;
•
Understand and enforce terms and conditions of contracts;
•
Reconsider grace periods and discounts; and
•
Re-evaluate your lock box strategy, and consider changing the mailing
address
customers use to send in payments so that lock box distribution matches
customer distribution, potentially cutting mail delivery time.
The Postal
Regulatory Commission is studying the proposed changes and is expected
to
release an advisory opinion. No changes are expected to take place
before
April. The U.S. Postal Service has said it will run out of money by
September
unless there is a congressional overhaul of its operations.
Read this
and other articles at the Dayton Business Journal
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