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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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