By Erin Cavallo
I’m a realist. I know that no matter what your job title is, if you’re responsible for your credit union’s statement printing, it’s not your top priority.
It probably doesn’t even make your “Top 10” list. Set it and forget it. That’s the approach many credit unions take, and I really can’t fault them for that.
Be that as it may, I’m going to let you in on a little secret: What may seem so easy on the surface may actually be costing your credit union a lot of unnecessary money. Sure, more and more members are moving to electronic statements, but the day when your membership will be at 100% electronic delivery is years and years away. In the meantime, like every other credit union, you need to be looking to cut costs wherever possible.
Maybe the contract with your current statement provider is coming up for renewal. Or maybe you and your board are just wondering whether your statement operation is really as cost-effective as it should be. In any event, a small amount of education can go a long way in saving you money on this expensive and necessary undertaking.
The Myths of Statement Processing
The most common method of evaluating statement vendors is creating an RFP and submitting it to multiple vendors for completion. Some credit unions opt to create this RFP on their own – which is very time-consuming. Others opt to hire a consultant to manage the RFP – which is very expensive. Unfortunately, in either scenario, even the most well-crafted and well-intentioned RFP probably won’t get you the information that you really need to make the best decision.
RFPs attempt, quite reasonably, to compare apples to apples. The problem lies in the fact that every vendor uses different technologies and different techniques to print your statements, not to mention different pricing matrices to arrive at a final cost. In other words, no RFP will ever be able to accurately compare apples to apples, because some vendors are selling oranges.
Specifically, most RFPs fall prey to three common myths.
Myth #1: Postage is a simple pass-through cost that doesn’t need to be figured into the cost comparison.
You probably don’t realize that some statement vendors treat postage as a profit center. At first, this may not make sense. If a vendor is, for example, metering each envelope at 41 cents and charging you 41 cents per envelope, how can they be making any profit on postage?
After your statements have already been printed and metered, some vendors combine and re-sort all of their outgoing mail so that it qualifies for an even lower rate. Once they document to the US Postal Service that your statements were actually metered higher than they should have been based on the comingling and re-sorting, the USPS issues the vendor a “workshare” refund. In other words, the vendor pockets a refund on your postage – a refund you never even knew about.
Myth #2: The vendor that charges the least for materials is cheaper, at least in that area.
It’s important to realize that some vendors will actually use fewer materials to produce your statements. That means that if one of these vendors has a higher per-unit cost for materials, that vendor may still save you money in the long run.
This all boils down to what the vendor does with your data once they receive it. If they basically print whatever you send, you’re paying too much for materials. A sophisticated vendor will reengineer your statement data so that each statement uses as few sheets of paper as possible. Depending on how many members you serve, this can make a substantial difference.
Myth #3: Cost of services is a straight-across comparison.
Again, RFPs tend to focus on per-unit cost. So again, if one vendor can get the job done printing fewer pages and/or mailing fewer envelopes, your monthly services cost may be lower even though the per-unit cost appears higher. There are also other factors that impact your services cost.
For example, suppose a particular statement contains three pages of data. Some vendors will charge you for printing four pages, because they include the blank page on the back as a “printed page” even though there’s nothing on it.
Likewise, if you have a standard boilerplate disclosure page that’s included on every statement, some vendors will count that just like any other printed page, even though it never varies and doesn’t require the data manipulation that your statement data does. Other vendors will charge you a lower rate for those boilerplate pages.
The Bottom Line
Statement printing isn’t glamorous, it isn’t strategic, and it isn’t even something you typically need to think about every day. However, if your current contract is coming up for renewal, it only makes sense to ensure you’re getting the most value for your statement printing dollar. Your CEO and your board just may thank you.
Erin Cavallo is Vice President, Client Services with Xpress Data, Inc.