Guide To Overcoming Transport & Logistics CashFlow Problems

To keep your transport and logistics cash flow in the black and avoid approaching a bank for funding, prevention is key.


By Luke Trickett

Whether you’re in the transportation business or responsible for managing several supply chain finance products, it’s not uncommon for these industries to run into cash flow problems every now and then.

Transport and logistics companies face several financial challenges, from loading delays to poor driver retention. If ignored, these hurdles can cause significant damage to an SMBs profits and may even force business owners to close their doors for good.

Fortunately, there is something business owners can do. In this blog, we’ll explore the common causes of cash flow problems in the transport and logistics industry, explain how to improve cash flow in a transport and logistics business and share a new invoice payment solution that can change how you manage cash for the better.

Why is managing cash flow important to a business?

To keep your business thriving, positive cash flow is crucial. Cash flow is responsible for keeping many aspects of your business running smoothly, from paying employers and supplier invoices to staying ahead of operational expenses and bills.

Other than your day-to-day responsibilities, your business also needs capital to grow. Whether you need a bigger workspace, want to expand your service range or need to train employees, healthy cash flow helps you reach your business goals.

What happens when cash runs dry in a transport and logistics business?

From poor supplier relationships to missed growth opportunities and even closing your doors for good, a lack of cash flow can wreak havoc on your business. Unfortunately, many transport and logistics companies regularly encounter cash flow problems and resort to risky small business finance options to stay afloat.

Traditional small business finance options, such as small business loans and credit cards, can give some business owners a sense of assurance, as they are more than often provided by major banks who own more than the majority of the market share — though that’s not to say these are options are entirely risk-free.

Small business loan interest rates can range from 5% to 30%, have ongoing fees and require frequent repayments, which can become unmanageable for already struggling SMBs with previous debt obligations. And in an era where lending criteria have become more stringent, loan approval is not always guaranteed.

On the other hand, business credit cards are easy enough to get your hands on and can be a resource for quick cash, but accumulating interest payments can burn a big hole in your budget.

To keep your transport and logistics cash flow in the black and avoid approaching a bank for funding, prevention is key. Let’s explore some common cash flow problems your business may encounter and how to avoid them.

Small business loan interest rates can range from 5% to 30%, have ongoing fees and require frequent repayments, which can become unmanageable for already struggling SMBs with previous debt obligations.

Poor client retention

Transport and logistics companies must prioritise client retention to succeed and maintain healthy cash flow. This means keeping your clients happy with exceptional communication and customer service and diversifying your clientele to keep your organisation competitive.

It’s also wise to maintain positive relationships with long-standing clients rather than investing most of your energy in chasing new ones. Speak to your loyal clients and ask for feedback on what your business is doing well and where they can improve. This gives you an insight into what your clients appreciate and expect from your service and illustrates your commitment to making them feel like a valued customer.

Some areas worth considering for your client retention program include 24/7 multi-channel access, providing special offers or incentives and providing tailored solutions that address their specific needs.

High driver turnover

While there may be fierce competition for drivers across the country, sourcing quality talent that will stick with your business for the long haul can take time and effort. Hiring quality drivers involves recruiting, onboarding, and training before they can hit the ground running — a costly endeavour for even the most established transport and logistics companies.

Drivers experience one of the highest turnover rates in the transportation industry. So, if you’re investing a large amount of your budget into recruiting and training only to see them leave months later, it won’t be long before your business’s cash flow takes a hit.

Not to mention that during the initial stages of recruitment, delays are more likely to occur as new drivers learn the ropes and work their way up to standard efficiency levels. This results in potential delays, fewer bookings and, of course, slow cash flow.

To boost driver retention and improve cash flow, transport and logistics companies must be willing to offer competitive pay and other incentives to their drivers. It is also worth investing in technology that simplifies their duties and provides a sense of community, as it can be an isolating role.

Many studies suggest that workers are more inclined to be loyal to organisations that make them feel valued. Research from Apollo Technical discovered that poor recognition and engagement from an organisation contributed to 44% of employees leaving the business.

Lengthy payment terms

One of the biggest causes of poor cash flow within the traffic and logistics industry is its payment terms. As a gesture of goodwill and to attract new clients, traffic and logistics management companies must be willing to offer clients extended payment terms and give customers between 30-90 days to pay an invoice.

This payment schedule can disrupt cash flow and create a backlog of unpaid invoices if you need to pay employees weekly or fortnightly or if your suppliers ask for payment. To speed up the process, offering special early payment incentives and discounts may be worthwhile to entice clients.

Unpaid invoices

In addition to longer payment terms, non-paying customers are a huge threat to cash flow for a transport and logistics company. Not only is it frustrating and time-consuming if you have to chase unpaid invoices, but it can also cause a significant delay in building your working capital — a burden felt by many industries across the country.

Statistics from Debtplacer revealed that approximately $115 billion worth of invoices remain outstanding, with up to $9 billion never being deposited into a business’s bank account. The big problem with unpaid invoices is that they can strike at any time, leaving many organisations vulnerable and unprepared for the fallout.

Transport and logistics organisations can recover these expenses quickly by issuing payment reminders, charging late payment fees or, in the case of traffic management business, Trafficwerx NT, considering an alternative method altogether.

After several instances of unpaid invoices, Trafficwerx NT turned to invoice payment solution, Marmalade as a way to boost cash flow. The platform allowed the traffic management business to unlock funds from unpaid invoices and turn them into real capital during their growth period.

Rather than having to turn to the banks for a loan, Marmalade was able to help Trafficwerx NT get back on its feet financially, expand and help one employee save up to 30 hours in admin duties per month.

Outdated payment processes

It’s worth noting that clients aren’t always liable for unpaid invoices — sometimes, its errors made on the business’s end. Typos, inputting incorrect billing information, missing information and forgetting to itemise charges are some of the most common invoice mistakes that occur across a range of industries, including transport and logistics.

These invoicing errors often appear when a business uses a manual data entry system for processing invoices. Approximately 85% of small businesses still rely on manual data entry systems to process invoices — and if your organisation is one of them, you could be hurting your cash flow by spending more than you need to. One paper invoice costs a business approximately $30.87 to process, while e-invoices cost only $9.18 for Australian and New Zealand businesses.

One important area of efficient cash flow management for transport and logistics businesses is automation. Doing this can help you save on expenses, improve accuracy and reduce the time spent amending errors, allowing you to allocate your employee’s workload to more productive tasks.

So between risky credit products, non-paying customers and lengthy payment terms, how can transport and logistics companies give their business the cash flow boost it may need to stay operational?

Meet Marmalade — the payment platform keeping SMBs at the top of their game

For several years, we’ve seen SMBs across the country have to sacrifice their goals due to poor cash flow, so we decided to create a solution that puts an end to missed opportunities. Marmalade is a first-of-its-kind invoice payment solution that turns unpaid invoices into capital.

Simply select the invoices you want early payment on and pay a one-off fee between 3-5%, Marmalade then transfers the funds to your nominated account within 24 hours.

Unpaid or late invoices are one of the biggest financial threats to any small business — our solution seeks to minimise this burden.

Marmalade is a 100% risk-free service with zero hidden fees. We understand how frustrating it can be to chase up late invoices, which is why we take on this responsibility and credit risk, so you can focus on running your business.

With Marmalade, you’ll be able to stay updated with the latest status of your invoices, thanks to our easy-to-navigate dashboard. Marmalade always keeps you in the driver’s seat as you watch cash flow through your business.

Marmalade is not a lender or financial institution, so you won’t ever have to worry about things like repayments, late fees and interest. We’re passionate about helping Australian small businesses thrive, so we do everything we can to keep your hard-earned dollars invested in your business.

Becoming a Marmalade customer is simple. No credit checks, lengthy application forms or security are needed to create your account. All you need to do is tell us a few things about your business, and you’re on your way.

Get paid on time, every time with Marmalade

If there’s one thing every business has in common, it’s the drive to grow — and Marmalade can help you unlock your business’s potential to get you there. We want to see businesses across Australia thrive. You know how to run your business, and we’re here to ensure it’s a smooth process. Get started by creating your free account with Marmalade today.