PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Small Businesses Feel the Impact of the Postal Service’s Financial Uncertainty

By at 19 December, 2022, 12:29 pm

By Karen Kerrigan –

Small business across the United States should be aware that the Postal Regulatory Commission has approved a request by the Post Office to raise rates. So, what does this mean for your small business? As the end of the year approaches, small businesses have been advised to accelerate their shipping of first-class items before the price of first-class mail increases.

The ongoing rise in postage rates has small business owners feeling as though the United States Postal Service (USPS) has lost touch with the local businesses it serves. Starting on January 22, 2023, the price of First-Class Mail Forever stamps will go up from 60 cents to 63 cents.

Post Office rates have yet to come with any transparency. USPS claims to have some of the lowest shipping rates, or as they call it “competitive pricing,” in the mailing industry. How could this be? USPS states that inflation is the cause of postal rates going up.

Still, the lack of transparency has the small business community concerned that the Postal Service is using profits from letter mail to achieve its goals in shipping operations, as SBE Council has expressed previously.

If true, this USPS practice is underhanded.

The decision to hastily alter Postal rates is destabilizing and costly for small businesses. Most small businesses price out every aspect of their business, from oversized line items to smaller expenditures, and all these costs have significantly increased during the past year. When postal rates increase, even if they seem modest, they impact small businesses across their operations – from an adjustment in marketing, billing, and direct-to-consumer sales.

Transparency is needed on why prices continue to go higher. If it is indeed the case that the profits gained from letter mail are being used to subsidize other rates, then small business owners and all postal customers need to know that. The Postal Service claims that it operates according to the profits that it receives, but the fact that the Post Office has not been financially profitable for a long time makes this notion of being self-sufficient hard to believe.

It is no secret that USPS has struggled financially. For the end of the fiscal year 2022, the Postal Service reported a $4.4 billion loss and projects an additional $4.5 billion loss in 2023. This consistently poor financial performance adds to the ambiguity around its budgetary structure. Consecutive years of poor financial performance indicates something structurally wrong with operations. Not many American companies or organizations could survive five years without breaking even or making a profit, let alone operating sixteen years in the red.

Much credit for why the Postal Service is still open for business goes to Congress. The Postal Service Reform Act gave the postal service $107 billion to stop the financial hardship.

But even with that generous support, USPS continues to bleed.

While the latest USPS fiscal report continues to show a significant deficit, taxpayers and all postal consumers need to know how billions was spent to provide a financial boost. The Postal Service Reform Act’s purpose was to alleviate the retirement debt obligations for the Post Office and, in return, create the conditions for the post office to prosper financially. Unfortunately, this did not seem to work.

Transparency is needed on how their business works, because so many small business owners are paying the price for perpetual increases that threaten their firm’s viability and competitiveness.

Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council.

 

 

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