How Much Does a Franking Machine Cost in 2014?

How Much Does a Franking Machine Cost in 2014?

Following the rise in the cost of UK postage stamps in April 2013 many companies examined their postal budgets in detail. Franking machines offer companies the opportunity to send a promotional message on all franked mail, weigh items in the office, and arrange postage at any time of day. Franking machines are purchased or hired under Royal Mail license from private companies. This fixed cost is offset by a headline saving of up to thirty eight per cent on traditional stamps.

Direct savings versus fixed costs

The relationship between the cost of a franking machine and the direct saving per unit makes the overall cost of a franking machine more suited to businesses with high mail volumes. The per unit savings must outweigh any fixed costs before a franking machine is a viable option. The fixed cost varies according to the model type purchased. Some machines will affix postage for thousands of letters per day whilst others are suited to volumes of less than fifty units per day. It is possible to rent a machine at the lower end of the scale for less twenty pounds a month with Pitney Bowes and this offers relatively low monthly break even volumes.

Buy versus rent

Some businesses send out thousands of paper communications each week and a basic franking machine would not offer the labour savings required to manage postal communications efficiently. A high end machine could cost as much as £20,000 to purchase and may require an additional maintenance contract. Payback could be achieved with a volume of 125,000 units which may take years to realise. A basic machine may be available to buy for £1,050 but this could be rented for over four years making rental a safer option.

Opportunity cost

A franking machine does have a significant opportunity cost which must be factored into any assessment on value. It provides businesses an excellent means of advertising a logo, special offer or new company strapline. The available space is not large but a powerful message can be delivered with all mail and such an effective form of advertising would be provided by an agency at a large premium. In addition the use of a franking machine with a feeder would save a large amount in labour costs as the process of manually fixing stamps to large volumes of letters is quite labour intensive.

Overall cost

The cost of a franking machine in 2014 is a matrix of fixed costs offset by variable savings. Much depends on the volumes of mail processed and for a machine to be most effective it must be appropriately matched. A high specification may be too much for small volumes but a basic machine may struggle to cope. Renting is probably the most cost effective solution because it is unlikely that a bought machine would offer a payback period of more than twelve months, the most likely minimum contractual term. It is clear that franking offers businesses the chance to run their postal operations more efficiently and make cost savings on an equivalent solution based on traditional postage stamps.

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