If the USPS Stops Delivering, Will Your Business Survive?

Do you know how much of your cash flow arrives via checks delivered by the United States Postal Service? If you don’t, go find out NOW. The survival of your business could hinge on it.

Today’s news of the receipt of another suspicious letter sent to elected officials immediately made me think of the 2001 anthrax mailings and how the resulting postal mail delivery slowdown nearly finished off my startup.

2001 was a rough year, and we were struggling to keep the doors open. The dot-com bubble was almost completely deflated, and it had simultaneously erased our lower-tier client base and caused our top-tier clients to cut back. Then came the September 11 attacks, which put even more downward pressure on business. While sad about broader events, me and my team were resolved that life and business would go on, even as we continued to juggle cash flow to keep the doors open.

But cash flow requires cash, and our accounts receivable split was roughly 75% checks delivered by the postal system and 25% by electronic credit card payments. As the postal system slowed down to clean up anthrax in sorting and delivery facilities, our daily mail volume decreased 90-95%. Our cash receipts tanked accordingly.

Ongoing conversations with vendors around our already late payments became even harder and meeting payroll was a real concern. Through heroic efforts on the part of Kris Bourne, we made payroll and kept the vendors from suing us for late payments. But it was close. At our lowest point, we had only a few weeks of cash on hand to fund operations.

As things returned to somewhat normal, we moved to ensure that another delivery interruption wouldn’t impact us as severely.

We shifted as many customers as possible to monthly, automatic credit card payments by offering discounts on service. For customers who wanted to continue to pay by check, we shifted many of them from monthly to quarterly payments. For new small accounts going forward, we required credit card payments.

Combined, these measures increased our average prepaid balances significantly, had the ancillary benefit of reducing our accounts receivable aging, and ensured that if the mail stopped flowing again, we would still have steady cash flow.

Are you prepared?

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