US mail slowdown will cost large firms $100m, claims study

Plans by the US Postal Service to eliminate next-day delivery for end-to-end First Class Mail could cost a typical large US company up to $100m a year, it was claimed today. Consultants at Miami-based Hackett Group subsidiary REL Consulting said the downgrading of the US mail service would make it more difficult for USPS customers to collect payments from their customers.

It is recommending companies focus efforts on switching to electronic payment systems as an alternative to physical mail.

USPS is looking to turn its First Class Mail service from a one-to-three day service into a two-to-three day service later this year, applying to regulators last month to make the changes. Major customers will be able to continue receiving a next-day First Class Mail delivery if they drop mail directly at processing plants at the right time of day.

The changes, which will not happen before mid-May, come as part of USPS efforts to downsize its processing network to half its current size, to cut costs in response to the 27% decline that First Class Mail volumes have suffered since 2006.

Delays

REL Consulting said analysis of 1,000 of the top US public companies suggested that 60% of all invoices in the US are still delivered by mail, and that it can take more than five weeks for firms to receive payments from customers.

It suggested the service standard changes could mean adding two to four days to the time it takes companies to receive payments back from customers, resulting in $100m in costs from outstanding unpaid bills for the typical large company.

REL global customer-to-cash practice leader Veronica Heald said: “Organisations should, now more than ever, conduct focused efforts to transition more of their customer payments to electronic methods.

“For some companies, it could be as simple as making sure that electronic payment remittance information is included on the face of the invoice,” she added.

As well as making it easier to make electronic payments, REL is advising its clients to send out bills by email and also consider changing mailing addresses for physical mail payments to locations closer to customers, in order to cut delivery times.

Understanding where late payment problems are happening, and incentivising customers to pay bills on time is also key to cutting down on costs, according to the REL advice.