Saying, “Your money is in the mail,” soon will suggest an even longer delay.
When the U.S. Postal Service no longer offers next-day delivery of first-class mail — a change likely in May — some Connecticut companies sending and receiving bills through the mail will see a serious disruption in their cash flow.
Despite reports saying the proposed USPS service cuts could cost large companies up to $100 million annually, the businesses regularly mailing bills to Connecticut customers say they aren’t terribly concerned about slower mail impacting their business.
“A-couple-of-day swing each way still gives the customer a pretty big window before their due date,” said Michael West, spokesman for New Haven-based UIL Holdings, the parent company for utilities United Illuminating, Connecticut Natural Gas Corp. and Southern Connecticut Gas Co.
Despite what they may be saying, these companies are stepping up efforts to avoid the mail altogether by having customers sign up for electronic payments.
“It is faster, it is more secure, and it is easier. It is easier to just point and click,” said Mitch Gross, spokesman for Berlin electric utility Connecticut Light & Power. “We have been promoting electronic billing over the last couple of years.”
A study by Miami-based REL Consulting says the USPS’ proposed eliminating of next-day first-class mail delivery will add up to four days to the companies’ collections cycle. Currently 40 percent of first-class mail is delivered the next day.
Since 60 percent of U.S. companies’ invoices still go out by mail, the slowdown in first-class deliveries could increase the number of days between sale and collection, costing companies up to $100 million annually, REL said.
The biggest concern from business right now is timing response from customers, said Mury Salls, senior vice president for South Windsor-based DST Output. The company produces and send 40-45 million pieces of first-class mail annually, such as bills and insurance forms for clients that include telecommunications firms and utilities.
DST Output has held seminars and information workshops for its clients to prepare for the impact of the mail consolidation. Companies are forming plans and working with partners such as DST Output to try to make sure the mail is sent as quickly as possible under the new system. One plan includes processing mail so it arrives at USPS sorting facilities immediately when they open.
“We’ve recognized for a long time that this is coming,” Salls said.
To combat disruptions in mail service, companies such as CL&P, UIL and telecommunications firm Verizon stagger their mail and due dates for customers, so payments arrive throughout the month.
But for the most part, these companies are leaving it up to their customers to pay by their due dates and saying they will impose penalty fees on customers if the payments are late, even if it’s due to the mail slowdown.
“These are monthly bills, but I don’t see a material impact on customers,” said Bob Varettoni, spokesman for Verizon.
The real solution lies in getting customers to receive their bills and send their payments electronically, so the USPS service quality is no longer a concern. At the end of last year, Verizon imposed and almost immediately retracted a $2 fee for its customers to pay electronically.
At CL&P, 47 percent of its customers have made the switch to electronic billing, Gross said. The company saves significantly on postage and mail processing staff, and will continue to push for its remaining 1.2 million customers to make the switch.
UIL wouldn’t disclose how many customers pay electronically, but the utility parent is coming up with new opportunities to encourage online bill payments, West said. The company benefits not only from cost savings but by reducing paper waste.
“Ultimately, the goal for us is to reduce as much paper as possible,” West said.
Despite the savings to the companies and increased uncertainty of the USPS, neither CL&P nor UIL are considering any financial incentives to encourage customers to switch to electronic payments.
While more customers are paying bills electronic, the problem is many of them still like to receive their bills through the mail first, having the paper in hand, Salls said. Businesses still suffer the cost of postage and printing, even though customers pay electronically.
“The vast majority of customers still want to get paper in the mail,” Salls said.
Therefore, it is in the best interest of business for the USPS to follow through with its proposed consolidations, Salls said. Closing processing facilities and post offices is preferential to another postage rate increase, which would happen if the closings were stopped.
“Pricing is important,” Salls said. “Forcing the Postal Service to jack up postal rates hurts business.”
