A hypothetical 3- cent increase would cost businesses an additional $810,000,000 in postage.

Size: px

Start display at page:

Download "A hypothetical 3- cent increase would cost businesses an additional $810,000,000 in postage."

Erin Jackson
6 years ago
Views:

2 Postal Service Volatility The U.S. Postal Service has been among the most reliable and respected organizations in America. But budgetary woes are permanently altering the expectations and productivity businesses have come to enjoy. After laying off more than 200,000 employees and cutting +$15 billion over the past several years, the USPS is now looking to end mail delivery on Saturdays. The reduction of delivery days has garnered the headlines, but given the pressing threat of a multi-billion dollar insolvency, even more changes seem inevitable. Postmaster General Patrick Donahoe issued a statement on the Postal Service Financial Crisis. In part, he said, As we look to the coming year, we are on an unsustainable financial path. We are currently losing $25 million per day, we have defaulted on $11.1 billion in Treasury payments and exhausted our borrowing authority. The Postal Service should not have to do business this way, which has undermined the confidence of our customer base and the $800 billion mailing industry we serve. Optimists hope the range of operational changes will have little effect on what customers have come to expect from the Post Office. But most people who follow these developments closely believe there is little evidence to support a rosy outlook. The USPS' multi-billion dollar budget shortfall is due in large part to the loss of almost half of its first class mail to the digital world including online bill pay and communication. The Boston Consulting Group projects mail volumes will decrease by an additional 35% within the next decade. A hypothetical 3- cent increase would cost businesses an additional $810,000,000 in postage. What Impact Can Business Expect? Of the 14 billion pieces of mail the USPS handles monthly, it is estimated that 15% of the volume is related to billing. Future "unknowns" are difficult to quantify. But the elimination of Saturday delivery and higher prices will have a tangible impact on business. For businesses that mail invoices and receive return payments through the mail, a five-day delivery schedule could add 1-2 days to the time it takes to get paid. A company that issues 50,000 bills per month could expect tens of thousands of dollars in receivables to languish undelivered, thereby negatively affecting cash flow. Compounding this is the possibility of the elimination of a delivery day in the middle of the work week. The recent increase in postage costs is estimated to cost businesses an additional $310,000,000 in postage. For the 50,000 bill-per-month business, that's an increase of $12,000 per year over the current postage rates. Cost-conscious customers will be affected also. A mailed bill almost always obligates the customer to return payment by mail. The trend toward electronic billing has grown steadily in recent years. Now, electronic billing is more than just a preferred convenience for both consumer and business customers. It is a cost-savings strategy that may soon become a must-have.

PUMA Makes Their Billing More "Athletic" PUMA North America found a way to help insulate its operations from postal problems by migrating much of its business to electronic billing.

3 PUMA Makes Their Billing More "Athletic" PUMA North America found a way to help insulate its operations from postal problems by migrating much of its business to electronic billing. Brian Good, Director of Customer Relations, said, "Our Accounts Receivable team recognized the need to lessen our dependency on paper processes. As postal rates continued to rise and service levels declined, we knew we needed a more efficient billing process. PUMA's decision to outsource their billing operations was more than a defensive move. They made a corporate decision to be proactive and innovative in getting efficiencies in their billing process. One important area the team wanted to address was DSO. They estimated that slower mail times, customer bill confusion, and the lack of tools to support billing inquiries added another 10 days to their DSO. The PUMA team set specific goals as they evaluated solutions for transforming their current processes: Reduce billing costs by over 25% Improve DSO by 10 days Reduce customer billing calls by 20% Provide customers with advanced electronic delivery and payment channels Support PUMA s corporate sustainability goals By outsourcing their billing, PUMA met their objectives. They transformed their billing process into a highly efficient, advanced business function. PUMA now uses a combination of mail and electronic billing. PUMA successfully reduced their costs by 30%. The PUMA Accounts Receivable team expects further reductions as they continue to migrate their customers from paper to electronic. They now offer their customers an online tool to access their own bills 24/7. As a result, they saw increased customer satisfaction and a reduced number of billing-related calls to their A/R team (Call Volume has changed from inquiry to payment detail requests). Our Accounts Receivable team realized the need to lessen our dependency on paper processes. As postal rates continued to rise and service levels declined, we knew we needed a more efficient billing process. As part of the transformation, PUMA successfully reduced their DSO by 10 days. What s more, they mitigated their reliance on mail, migrated more of their customers to electronic billing, and thereby gave their customers access to bills the day after they were generated (including online access 24/7).

4 Five Tips for a Proactive Billing Strategy 1. Shrink the Country One way to reduce mail time is to issue bills closer to the recipient. A bill mailed from Dallas gets to Oklahoma City faster than if mailed from Philadelphia. Billtrust, for example, has mailing facilities spread throughout North America with computerized sorting by zip code. This can take days out of delivery times. 2. Campaign for e-adoption The more customers that opt to receive and pay bills electronically, the faster business gets paid and costs are reduced. Migrating customers to online billing saves approximately 75% over paper bills. And the great part is, many customers prefer electronic billing and appreciate vendors giving them that option. The key is for your organization to have a systematic plan to apply best practices to drive e-adoption. 3. Batch Those Bills One crucial cost-mitigation strategy is to maximize the number of bills sent in an envelope to your customer. This can be done by applying smart rules, such as setting a minimum dollar threshold that must be met before a bill will be sent out. This results in significant savings on postage and material. This consolidation technique will be especially valuable as postage costs go up. At Billtrust, we call this technique Bullpenning and have developed sophisticated algorithms to make the technology efficient. 4. Use a Multi-envelope Strategy Most businesses deliver their invoices in #10 envelopes and flats (catalog size envelopes) depending on the number of pages being sent. However, postage rates for flat envelopes have increased by over 40% in the past few years. Businesses should now apply multiple envelope sizes to offset these increased costs. At Billtrust, we added a 6x9 envelope into our mix. With a 6x9, more invoices can be put into a single envelope without having to resort to a flat. 5. Be Postal Smart You should be using advanced equipment and software to maximize postal discounts. Make sure you are properly pre-sorting your mail by segmenting each piece per "zip+4 code". If your company has multiple divisions, see if you can consolidate your mailing to achieve economies of scale. Another strategy for being postal smart is to effectively manage your customer s addresses. The USPS reports that nearly one-fourth of all the mail that goes through its system contains some kind of error. If the address on your mail piece is not recognized it will not qualify for presort discounts and will be mailed at full rate (not to mention taking longer to get to your customer).

Concluding Thoughts Changes at the USPS will affect each and every business that mails bills. Delivery times will be longer, payments will be delayed, and costs will increase.

Automated billing from Billtrust provides many advantages, including comprehensive strategies and economies that help mitigate postal system uncertainty.

5 Concluding Thoughts Changes at the USPS will affect each and every business that mails bills. Delivery times will be longer, payments will be delayed, and costs will increase. The higher the volume of monthly bills, the greater the negative impact. Automated billing from Billtrust provides many advantages, including comprehensive strategies and economies that help mitigate postal system uncertainty. For more information on smarter billing solutions, call Billtrust at BILL or visit Billtrust is the premier provider of Payment Cycle Management solutions, helping businesses accelerate invoice-to-cash. By integrating the three key areas of the payment cycle: invoice presentment, invoice payment, and cash application, Billtrust is committed to delivering a flexible solution to improve buyer satisfaction and DSO. In 2014, the Billtrust invoice-to-cash solution processed over $250 billion in receivables for leading companies including Kraft Foods, Under Armour, Estes Express and CDW.

THE STRATEGIC VALUE OF INVOICE-TO-CASH BEST PRACTICES.

www.billtrust.com THE STRATEGIC VALUE OF INVOICE-TO-CASH BEST PRACTICES 100 American Metro Boulevard, Suite 150 Hamilton, NJ 08619 609.235.1010 sales@billtrust.com THE STRATEGIC VALUE OF INOVICE-TO-CASH