The U.S. Postal Service said it plans to gradually reduce the number of cash managers it does business with to fewer than 1,000.
About half of the nation's commercial banks currently provide cash management services that help the Postal Service handle its $80 billion in annual cash flow.
The consolidation of cash management relationships is increasingly common for large businesses. According to a survey conducted by Greenwich Associates Inc. of Connecticut, the largest cash managers tend to be the benefactors of such consolidations.
"We have 5,000 banks that we deal with that handle coin, currency, and checks," said Stephen C. Kearney, treasurer of the Postal Service.
"We've set up an evaluation process that gives banks points" that determine whether they will get more or less business.
The scores are based on pricing, service quality, geographical reach, and a bank's ability to handle specific dollar volumes.
About 35 of the largest cash managers are expected to receive the bulk of the Postal Service's business. Several hundred more are expected to receive small-scale cash management responsibilities.
The consolidation should be completed sometime in the next two years, Postal Service officials said.
Prominent cash managers for the Postal Service include Citicorp, New York, which provides lockbox services; BankAmerica Corp., San Francisco, which develops automated clearing house and other electronic payment options; and First Chicago NBD Corp., Chicago, and Mellon Bank Corp., Pittsburgh, which provide controlled disbursement services.
In addition, NationsBank Corp., Charlotte, N.C. - in conjunction with First Data Corp.'s CES/Nabanco unit - handles the processing of debit and credit card transactions from more than 30,000 post offices.
The consolidation of the Postal Service's cash management relationships is part of a larger overhaul of postal operations led by Mr. Kearney.
At the time of his appointment in 1990, the service's treasury operations, which take in about $300 million daily, had become inefficient and were contributing to some of the largest losses in its history. In 1994, the organization reported a $900 million operating loss.
Mr. Kearney said that improved cash forecasting, better use of cash management services, and use of new electronic funds services played major roles in helping the Postal Service to right itself last year. For 1995, the service recorded its highest net income ever - $1.8 billion.
"We really changed our outlook from being a break-even government agency to a bottom-line-oriented business," Mr. Kearney said. "We changed more of our cash management in the last two years than in the previous 200 years."
Linda Corbett, a vice president with NationsBank, said she understands the Postal Service's drive to develop "additional payment systems that would be more customer-focused."
"They've had remarkable results under current management," Ms. Corbett said.