November 1, 2013 •Brian Watson
Revenue collection requires a tricky balancing act.
On one hand, your revenue cycle collects the money from customers that you need to pay employees and vendors, reinvest in new equipment and technology, and otherwise run your business.
That’s obviously pretty important stuff. So it better be fast, simple, and effective.
On the other hand, it’s still a cost center. And each bill that you mail is an expense that subtracts from the total dollar amount you’re collecting. Each payment channel you offer is an extra line item in the budget. Every statement that bounces back as return to sender is cash that could be used for other mission-critical stuff.
Sure, there’s a clear benefit to collecting as much money as possible, as quickly as possible. But there’s also value in keeping billing costs low. They both affect bottom-line profitability, after all.
Fortunately, revenue cycle performance and efficiency doesn’t have be an either/or tradeoff. There are several simple statement print and mail tricks you can use to keep billing costs under control without sacrificing delivery speed or statement quality.
And I’ll be sharing some of those statement processing efficiency boosters throughout the remainder of this post.
1. Consolidation
Late last month, the USPS announced across-the-board delivery rate increases for 2014 in an attempt to raise an extra $2 billion in revenue. Given the financial duress the Postal Service is experiencing and the uncertainty surrounding proposed postal reforms, future increases are likely.
One answer to the problem of growing postage costs is statement consolidation – the practice of grouping together multiple bills that go to the same address into a single envelope for delivery.
For instance, a business may order from several different locations or departments, but still have one centralized business office that's responsible for payment. Or a patient might receive bills from multiple hospital-affiliated entities that all played a role in their treatment.
Instead of processing, printing, and mailing statements for each purchase order or shipment, statement processing companies use consolidation and integration to provide customers with a single bill that saves time and money.
2. Suppression
Statement suppression helps businesses avoid the cost of sending out unnecessary billing.
For example, a statement should never be delivered when processing, printing, and mailing costs are greater than the outstanding balance – say a patient statement where there’s no new activity within a billing cycle and a procedure balance of zero.
Think of suppression as a print and mail inefficiency finder. Suppression automatically flags any statements that don’t meet send criteria, ensuring that you’re never underwater on the cost of bill delivery.
But it’s no one-trick pony. It can also be used to prevent delivery of statements with flawed or incomplete address information. Or bills for accounts that are eligible for special financial assistance or meet early-out or pre-collection requirements.
3. Piggybacking
When it comes to revenue collection, businesses are fixated on speed. And justifiably so. The quicker statements reach customers, the faster you can collect the revenue you need to run your business.
But there are situations when the cost of billing outweighs the benefits of speed. In those situations, planning and discretion win out.
Bill piggybacking combines the ideas behind consolidation and suppression – incorporating multiple statements into a single bill, holding back on delivery until the costs of production make financial sense – while also adding custom business intelligence to find the perfect sweet spot between the cost of billing and the benefit of having more cash flow on hand.
That’s a bit of a mouthful, so let me explain.
Say there’s a customer in your next statement cycle that has a bill with a smaller-than-ordinary balance due. The dollar amount on the transaction is large enough that you wouldn’t risk losing money on delivery. But the sum total is small enough that you could save a considerable amount on statement print and mail costs if you wait until a predetermined balance due threshold is met to send a consolidated statement.
That’s bill piggybacking in a nutshell.
Businesses establish a minimum balance due for all outgoing statements. If a bill doesn’t exceed that amount, it’s held until additional transactions exceed the set dollar amount. Then a consolidated statement is produced and delivered.
To avoid having a bill linger too long, a delivery cut-off date is also established. If no new bills are added to the production queue during that period, the statement is printed and mailed as is.
Sure, piggybacking isn’t for everyone – businesses that only send customers a single statement each month or quarter, for example. But if you send out statements or invoices for each customer transaction (and your customers tend to have a lot of transactions), then trading a few days in A/R for lower collection costs can be a really smart play.
4. Postal Presorting
Postal presorting is when statement processing companies sort all outgoing mail into bundles or trays by ZIP Code or carrier route before it’s dropped off at a USPS facility for final delivery.
And it’s an indispensible tool for businesses in the fight against consistently rising postage costs.
Grouping by recipient ZIP code isn’t something that the USPS requires of mailers. But they do reward those that do it for them with substantially lower postage costs.
The tradeoff is easy to understand. When a statement processing company presorts outgoing mail, it keeps the USPS from having to perform the same step internally. That saves time and money, which they then pass along to mailers in the form of postal rate cuts of up to 50%.
5. Address Cleansing
Return mail is a major problem for businesses that bill customers by mail.
According to Pitney Bowes, approximately 1.4 billion pieces of first class mail are returned to sender each year, due to incomplete or incorrect address information. That’s 2.5 percent of all the first class mail that the USPS delivers.
At an estimated cost of $3 per return, the costs from poorly vetted address information can add up quickly.
For example, a business that sends out 500,000 statements each year can expect – based upon average return mail statistics – approximately 12,500 of those bills to bounce back as return to sender. With an estimated cost of $3 per return, that adds up to a total expense of $37,500.
And that’s without even considering the impact mail delays can have on revenue cycle effectiveness. On average, it takes 45 days for mail with faulty address information to be sent back to businesses as return to sender. That’s a long time for businesses to wait to receive the cash they’re owed.
Address cleansing is a pre-delivery practice that ensures the most up-to-date customer address information is used during mailing operations.
By tapping into data from the USPS that verifies address information and tracks when a person moves (and where they move to), mailers are able to get send data right before it becomes a costly problem down the road.
Want more statement processing work-arounds that help reduce the cost of collecting from customers? Download our free statement processing whitepaper – The Five Habits of Highly Effective Statement Processing Solutions.
What tricks do you have up your sleeve to reduce collection costs? Share them in the comments section!