Benjamins, dough, cabbage, coin, greenbacks. Most of us could rattle off a dozen or more slang words that mean money. But we might be unsure what certain financial terms -- operating income, liquidity -- mean. When you follow the U.S. Postal Service, this might put you at a disadvantage, especially when it’s quarterly financial statement time.

Operating income measures earnings (revenues minus expenses) before interest and taxes. Liquidity is the amount of financial resources (cash, equity, assets, credit) that an organization can easily convert to cash for spending and investments. Postal officials often mention the Postal Service’s lack of liquidity. Chief Financial Officer Joe Corbett said in January that the Postal Service’s liquidity, at its highest point in the year, is only about $3 billion. This isn’t much cushion for a $65 billion entity. And the cushion shrinks at certain points in the year, such as in October, when the Postal Service makes its workers’ compensation payment to the Labor Department.

UPS and FedEx, companies with revenues about $20 billion less than the Postal Service, have liquidity of about $12 billion and $14 billion respectively, he noted. But what does this mean exactly? Well, companies with strong liquidity positions, such as UPS and FedEx, have much greater access to capital than the Postal Service. They have more opportunity to invest, whether in capital projects or new businesses. The Postal Service’s weak cash position means it cannot invest in the infrastructure or innovation. It also has no margin for error. What happens if a catastrophe strikes in October right after the Postal Service has made its workers compensation payment?

Finally, the Postal Service has no available cash to pay down its debt. It reached its statutory borrowing limit of $15 billion in FY 2012 and it has been unable to borrow from the Treasury Department for more than a year.

The Postal Service says employees will get paid – this is not an issue. And it has enough cash on hand to pay suppliers. But it has had to forego needed investment in its infrastructure, such as facility maintenance and vehicle replacement. And as the Postal Service considers a new business model for the digital age, it has no available cash to invest in new opportunities. It has not had the funds to make its required prefunding payment to the retiree healthcare fund for the past few years. The postage price increase in late January should help its cash position, but it will not build the bigger cushion it needs.

Share your thoughts on the Postal Service’s cash position. What is hurt most by the Postal Service’s lack of liquidity? Is it missing opportunities because of its cash shortage? If its liquidity position were to improve, what should be the Postal Service’s priorities (infrastructure investment, paying down debt, lowering postal rates, etc.)? 

Comments (7)

  • anon

    This cash poor organization is making Sunday deliveries of Amazon packages to private homes. Hum .... double time pay for overpayed employees to deliver $5 in revenue packages, my 5 years old child can see the folly in this system, maybe she should run the post office.

    Oct 16, 2016
  • anon

    this article--in reference to a closing facility. it's overtly negative and single sided, even if its' true...

    Apr 02, 2015
  • anon

    As a taxpayer and a small business owner, it is amazing to me that the postal service, with its huge deficits, provide the shipping supplies for free and then compare themselves to the profitable FedEx and UPS. Those two organizations do not provide shipping supplies. The amount of money USPS spends on the odd size boxes, regional boxes and on and on has to be tremendous. If you want to cut expenses cut everything but your flat rate envelopes, tyvek envelopes and flat rate boxes. Let retailers supply there own packaging just like they do with UPS or FedEx. Do we really need Spiderman printed on boxes, I don't think so. These "Marketing" ploys are only making the marketing department money and the guys who are printing the boxes. Cut your expenses, cut your box supply. I for one know that we only use the basic supplies but we have hundreds of boxes here that we may use someday. I am changing our ordering techniques to specifically quit using the odd size boxes to help remove deficit in this country that we don't need. If UPS and FedEx can ship without all the special sizes etc, I am sure the post office can figure it out.

    Aug 12, 2014
  • anon

    Comparing USPS with fedex and ups is an exercise in futility. The business models are completely different. USPS is a mandated bastard child of government which service a noble and useful purpose. Ups and fedex, on the other hand, are stock companies with access to capital markets thru bonds and issuing of stock plus lines of credit, etc. They can and do cast off unprofitable ventures at will. They do respond quickly with price and surcharge additions to protect and enhance their bottom lines. Compare ups and fedex to USPS in their unfunded healthcare and retirement liabilities. How would ups and fedex fair if they had USPS' funding mandates. Until Congress wakes up and decides that the postal service was manipulated to fail by prior legislation and will continue to be eroded, nothing will change. Are the National Parks required to be profitable? Does the National Cancer Institute need to create revenue streams? The Bureau of Land Management can definitely increase the license fees to extractors of ore and timber from public lands. Just how much income did the Department of Defense bring in last year? And a footnote: The recent fancy in government in "deregulating" doesn't have too good a track record. The banking industry's big fat self imposed destruction of the economy, the dereugulated energy industry's Enron affair, the airlines industry's lack of affordable routes to non-large metropolis areas. You can add to the list. USPS is infrastructure. Congress has done little to upkeep our nation's infrastructure. So my thoughts on Cash Position??? USPS is the child of her creators, ask them for help for the problems which they created.

    Mar 29, 2014
  • anon

    If you want to help the USPS and the country read the New Patent US 8643511 B1 for remote mail delivery notification. The time is right to provide a much needed service and to make money. This will help the USPS compete in the digital age.

    Mar 12, 2014
  • anon

    I would like to suggest the USPS stop printing words on the inside of priority mailing boxes. This could save you millions on printers ink, just like the airlines found they could save millions by leaving one olive off the salads they served on their planes.

    Mar 12, 2014
  • anon

    OIG has recently proposed a postal bank for those without banking or savings accounts to offer inexpensive services to cover check cashing and loans as well as other none traditional bank services.This service would yield about 9 billion dollars a year.This postal bank would be seen as a populist contribution to the millions of Americans who need this kind of banking service .

    Mar 10, 2014

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