It’s not news that the United States Postal Service is losing money. At a recent press conference, a USPS spokesperson claimed the organization loses were approximately $23 million per day. As a result, the USPS just announced it will be closing 252 of its 461 mail processing centers beginning early next year. This is a basic network cost optimization maneuver and nothing more.
However, the result is that the USPS logistical network will be permanently changed and it will force the delay of first-class mail. Regardless of how you feel about USPS and its approaches to dealing with their revenue shortfall, its changes are reality, and they will impact your business. In this post, I’ll evaluate the problem and provide some alternatives.
Cash Flow for Businesses
Many businesses, large and small, still send invoices and make payments via first-class mail. If you add two days to four days on each side to the logistical portion of that transaction, you could be extending your cash timetables by as much as eight days. With an average of 22 working days per month, you’ve just thrown cash flow off by almost one-third of a working month.
For example, our companies are headquartered in Dallas and we pay many local vendors by first-class mail. Why? There are three sound reasons:
- We double journal all entries and base this off of a physical check number. Yes, I know I sound “freeze dried” when I say that, but it’s incredibly efficient when it comes to IRS audits, billing dependencies, and legal action.
- When you initiate payment, you maintain control. It is a real challenge to track and deal with automated payments especially when trying to cancel a service or dispute a bill.
- People’s email inboxes are packed these days. We want our invoices front and center to a company versus ending up at the bottom of a bunch of spam messages in an employee’s inbox who left the company three weeks ago of which we are not aware.
So, here is how first-class mail impacts our cash flow for local invoices and payments. We are based in Dallas, Texas, and our regional mail center is on that list of 252 that are closing. Thus, all mail from Dallas and surrounding suburbs will be sent to the much smaller city of Ft. Worth, which is an hour away. Depending on how I send local mail, it could take two days to three days to get to its inter-Dallas location; today it arrives the next day.
If we send an invoice with 20-day terms on the first of the month, it doesn’t arrive until the third at the earliest and fifth at the latest (hopefully) depending on where the weekend falls. The 20-day terms put its payment toward the 25th of the month to enter into the two-to-three-day timetable again. We actually deposit all checks electronically, which interjects another two-day delay in the process.
Guess what? If clients pay on time, we just missed end-of-month payroll. We are going to have to re-analyze our entire cash flow and billing cycles or simply make changes to avoid the mail. You probably will need to do this, too.
Though it is easy for service-based businesses to convert to “all digital,” many companies in the United States still ship physical goods. One of our businesses sells children’s learning products and shipping USPS has been the most effective way to do this.
That was until the changes. Now we have to make decisions as to whether our customers will tolerate the delay in shipping or we need to take a different approach. We also know that the cost of shipping via USPS will continue to grow.
From mortgages to credit card payments, mail delays will have a huge impact on our financial institutions. I know I just got done complaining about our measly payroll but the financial numbers associated with financial institution payments that travel through the mail are huge. On the flip side, these delays could benefit our cash flow. Still, I don’t like being a slow pay because of the mail.
Certified Mail and Tracked Mail
Many businesses including accountants, lawyers, and financial institutions rely on certified first-class mail. The law mandates much of its usage. They have no choice but to expect delays or to use electronic methods to jump-start their processes that will be followed by certified snail mail.
What Can You Do To Minimize The Impact On Your Business?
Now is the time for change in your business. The following are a list of things we have either done or will have implemented by Q1 of next year. I would suggest that you look into implementing some of them as well.
Convert all of your invoicing to electronic-based invoices and follow-up with first-class mail for any complicated customers. Most invoicing and mail clients will allow you to track the receipt of an email.
The mail delays actually work to our advantage when it comes to cash flow. However, we have a hard and fast rule of not “riding” fellow small businesses or contractors (see the Golden Rule of Payables for more info). Thus, we have converted all who are important to us to electronic payment through our payroll system, and we still double journal the entry for our record keeping purposes.
There is a multitude of ways to outsource the shipping of your products. These include selecting a carrier like UPS or FedEx and only making those options available to full service fulfillment and logistics services. We actually experimented with Fullfillment By Amazon with our one product company for the holiday season. It has been amazing and well worth the fees we pay. We will likely outsource the entire process to them in the coming year.
Enterprise Level Digital Services
It is amazing to see the number of business owners who are willing to send sensitive material (e.g. containing social security numbers) over regular, unencrypted email. It is also amazing the number of businesses who think that an email will suffice in court.
There are services that provide secure and traceable deliveries of files to individuals and businesses. One that we use is Filesanywhere.com. Files Anywhere was designed for the enterprise but is available at small business pricing. We’ve actually used their tracking files in court.
There is a part of me that just wants to go off on the postal system. After all, who can afford to own their own tow trucks in a world of noncore service outsourcing? Obviously they can’t but still do. Yet, a general rant won’t impact their constraints, leadership decisions, or core direction. So, I can only impact the businesses with which I’m associated and I’m doing so by selecting providers that offer services the USPS should have built a decade ago.
I feel confident that the changes we are implementing in ourwill enable us to survive the demise of first-class mail as we have known it.
How will your business handle the USPS changes?