The U.S. Postal Service, burdened by billions of dollars of debt, rising costs and declining mail volume, is undergoing major transformation that will impact businesses of all sizes. However, the changes may be particularly jarring for small and medium businesses that rely on the USPS for invoicing, billing, parcel shipping, payments and other commercial endeavors.
After decades of steady growth, the USPS has struggled to stay above water as electronic communications have replaced many types of printed materials in recent years. Last year, mail volume hit a record low of 167.9 billion pieces, down from a peak of 213.1 billion in 2006. The sluggish demand has contributed to the USPS experiencing a cumulative net loss of nearly $20 billion over the last five fiscal years.
“It’s a desperate situation,” says John Callan, a strategy consultant in postal-parcel logistics and managing director at Ursa Major Associates, LLC. To try to make ends meet, the USPS has announced plans to close 300 of its more than 500 mail processing plants, and 12,000 of its retail facilities. Meanwhile, the USPS has proposed limiting mail delivery to five days a week. In January the USPS also increased the price of stamps by one penny to 45 cents — the first postage rate increase since 2009.
Finally, the USPS is set to eliminate most overnight delivery of first-class mail. Companies that rely on mail for invoices, customer bills and remittances, will be heavily impacted, as they tend to use first-class delivery the most.
The USPS’ decision to eliminate overnight delivery of first-class mail is set to have an especially significant impact on service-based small businesses, since these organizations tend to be much more cash flow sensitive than their larger counterparts. The combined effect of these curtailments means that it will soon be considerably harder to collect from customers quickly. Small businesses that rely on mailed invoices and checks can expect payment cycles to take longer, should adjust their forecasting accordingly, and should begin to explore alternatives to mail.
“[Businesses] are concerned about getting bills out to their customers without delay and getting those payments back on time,” says Lori Beck, director of product management for Western Union. “They’re concerned about their cash flow.”
Fortunately, small businesses can avoid these issues and reduce costs by turning to managing their receivables online – specifically, emailing their invoices and adopting electronic payment acceptance. In fact, about 36 percent of transaction documents — bills, statements and invoices — will be delivered paperless to consumer households by 2015, up from 15 percent at the end of 2011.
For consumers, it’s already easier and far more convenient to pay bills online because they don’t have to buy stamps or trudge to the local post office. However, 82 percent of transaction documents are still paper based.4
While the convenience of eBilling is enticing, many people still want to have hard copies for recordkeeping purposes. Businesses can overcome this issue by letting customers know that electronic invoices are easy to print and file. They are also ideal for customers who like to store their records electronically.
Electronic invoicing can also help customers stay on top of upcoming due dates, which can help small businesses get paid faster and improve their cash flow. “When a customer gets an emailed invoice, it serves as a reminder that the bill is due and prompts them to take action,” Beck says. eBilling and electronic payments also affords customers the ability to choose their payment method, including ACH, credit cards and debit cards. Accepting multiple forms of payment can increase convenience for all customers—but for some cash-strapped consumers, this flexibility is a necessity.
Even for customers who are not short on funds, having a choice of payment types and the ability to make payments online is an extremely appealing service. “Small and medium businesses are seeing these service cuts as a detriment, but the good news is that solving for this problem can actually bring additional benefits to your business,” notes Beck. “We’re seeing many businesses investigate online receivables management because of post office cuts and find that they not only get paid faster, but are able to spend less time on administrative tasks and improve their overall customer service. It’s nice to see a silver lining in these cuts.”