Postage Expense Tracking:

Don't Let Mailing Costs Grow Faster Than Your Business

By Jerome Agnol

July 7th, 2008 -- One year later, "Groundbreaking" is an appropriate word to describe the last May's rate change from the United States Post Office (USPS).

In fact, the rate change, which took place just one year ago, delivered an unprecedented surge of cost and complexity to American businesses. Under the USPS's new Shape-Based Pricing (SBP) rules, mail items that may look similar to the naked eye (because they weigh and look the same) now have to be priced differently depending on their length, height, thickness and weight. Organizations that were not prepared, and kept sending letter, flats and parcels the way they did before the rate change might experience postage cost increases as high as 40% to 50% on their mail pieces.

Further complicating matters is the fact that commercial and express carriers continue to increase rates every year, making it difficult for customers to determine which carrier offers the best cost/service ratio for a specific mailing or shipment.

Most companies underestimate the impact that a few corrective actions can have on their overall mailing and shipping expenses, as well as the ability to track and manage them.

Unless your brain (or the brain of the person in charge of your mailing and shipping activities) can compute a few thousand "shape-based" and rating combinations instantaneously, there is a good chance that your company is either overpaying or underpaying the postage due for the mail and packages you send out every day. Naturally, because of the higher postage rates and increased complexity ---due largely to the SBP changes--- customers will not only need better mail automation but also increased visibility and detailed reporting of postal expenses.

The good news? There are myriad ways to track postage expenditures more accurately and, as a result, reduce those costs significantly. Some of the ways involve simply making just a few small adjustments in your mailroom operation; others are a bit more complex and require a financial investment in new technology (i.e., mailroom software solutions).

Is it worth it?

Most companies underestimate the impact that a few corrective actions can have on their overall mailing and shipping expenses, as well as the ability to track and manage them. Typical mail centers spend way too much time on tedious manual handling processes which create inefficiencies, costly errors and frustration throughout the organization.

If you think your company is the only one to have forgotten that automation and efficiency are also applicable to the mail center, think again. In a recent survey, 68% of the respondents cited the need to consolidate and share postage expenditure data with others in their company. Yet approximately 95% of mailroom operators still transmit reports to their superiors in paper form, and more than half of those who need to consolidate the data from multiple mailing systems do it manually.

The data extracted from the printed reports are often keyed into a spreadsheet program; clearly, the chances for errors, incomplete information and inefficient reporting are very high in this scenario. In fact, 30% of the respondents said they don't consolidate data simply because it is too complex to do so. Many respondents also reported using a paper log-book for recording mail-related transaction, which ultimately turns the charge-back process of expenses to internal or external customers into a very tedious process.

And there's more. Being able to compare the new Post Office rates with those of commercial carriers is now more crucial than ever, given the scope of the new postal regulations. Yet two-thirds of the survey respondents admit to using two or more independent carrier-provided shipping solutions (carrier's Web site, carrier-provided software, etc.) that do not offer rate-shopping or data-consolidation capabilities.

From a broad perspective, the various approaches to tracking and accounting can be grouped into three basic action steps:

Audit your postage usage. Step back and take a look at the volume of mail that leaves your mailroom weekly, monthly and annually. Evaluate how much these items weigh, their postage rates, and what type of packaging is used.

Calculate the Impact of Shape-Based Pricing. Estimate the impact of the proposed postage increase by applying the new rates, and evaluating the potential increased mail preparation workload, sorting mail by size, thickness or weight.

Track and Control Postage. As postage and shipping costs continue to rise, you may want to consider tracking postage costs by department. Most of today's mailing systems have integrated accounting tools which will help track the number of mail pieces sent and postage spent per department. Some of the latest systems even allow the user to view postage usage statistics online, as well as data exporting options and the ability to print color graphical reports by user-defined time periods.

It is the last point on which we will focus our attention. Companies that make the commitment to tracking and reducing cost should take advantage of the latest mailing and shipping software solutions available on the market today. The two types of software solutions that can help businesses offset the new postal cost increase are mail accounting software solutions and multi-carrier shipping software solutions.

The Maturation of Mail Accounting Software

Before May 14, mail accounting solutions were used to report how postage is spent and subsequently charged back to internal and external departments. Since that day, besides their reporting functions, they must now be relied on to analyze expenses and maximize savings by adjusting to limit postage increases. Essentially, they have become vital tools for analysis and decision-making vis-à-vis a company's total mailing strategy.

Mail accounting software solutions can play a critical role in keeping track of postal expenditures by mail class usage, surcharges and department expenses. More importantly, mail accounting software will not only track postal expenditures but can actually help keep them down. For instance, budgets can be set, and the software can be programmed to alert the user when these predetermined budgets are about to be exceeded.

Mail accounting software solutions must also make information available to the mail center, as well as to all other necessary departments in the company. Some of the most recent software solutions, like Neopost's Mail Accounting Software (MAS) allow real-time access via the company's intranet to all mailing and shipping data from one or multiple mailing machines, at either a single or multiple physical locations.

Mailing and postage data can also be easily exported in various standard formats - including CSV, XML and PDF - and then emailed to all interested parties (e.g., the accounting/finance department). The end result is clear and precise data that can subsequently be analyzed to monitor charge-back errors and areas of potential savings area, such as a company with mid- to high- mail volume that is not taking advantage of presort discounted postage rates.

Multi-Carrier Shipping Software Provides Multi-Benefits

As the name indicates, a multi-carrier shipping system gives users the ability to ship with various carriers, such as USPS, UPS, FedEx, etc. Primarily, it facilitates instant comparison of various carrier rate and service options, which can help eliminate unnecessary overnight premium rates. With the major parcel shipping companies increasing their costs every year, it is more crucial than ever to ensure that your company is not overspending on parcel shipping.

Using these multi-carrier shipping software solutions, it is possible to guarantee data integrity and drastically reduce error entry, as there is no more need to manually consolidate shipping data from multiple software packages or keep updating the same address book in multiple computers. What's more, shipping data access and visibility is increased throughout the organization.

In addition to the automated, turnkey multi-carrier shipping solutions that can be found in mail centers, more companies are adding another layer of shipping automation right on their employees' desktops. This is made possible by a new "Desktop Shipping" solution that some vendors offer which allow employees to create a shipping traveler document directly on their computer. These documents can be printed on any standard ink-jet or laser printer, and then scanned in the mailroom to allow quick and accurate retrieval of the shipping information (ship-to address, service to be used, shipper and recipient email addresses, account/dept to be charged for the transaction, etc.).

Interestingly, these desktop shipping solutions can be configured to allow the employee to make more or fewer shipping decisions, depending on company's needs and policies. Some organizations, for instance, will let employees decide which carrier and service to use; other organizations only need them to indicate the urgency level - the latest time at which the package can be delivered – while the mail center picks the carrier and service based on the company's shipping policy. Ultimately, the desktop shipping solution can be programmed to ensure that all of the company's standard and mandatory shipping business rules are enforced, while still allowing the freedom of choice where and when it is appropriate.

Due to the new business climate created by the USPS's sweeping rate changes, tracking and controlling postage expenses has become a front-burner item. And it will require a company to diligently examine numerous aspects of its mailroom operations, particularly its mail accounting and multi-carrier solutions. But for those companies willing to make the effort, the ultimate rewards – cost savings, increased mailroom efficiency, more satisfied employee and customers - will make it all worthwhile.

Jerome Agnola is Sr. Marketing Director, Data Management Systems at Neopost.