Operations in the TSL sector, while crucial to the global economy, are proving to be alarmingly expensive. High operating costs in road transport are inevitable due to factors such as fuel prices, vehicle maintenance, road tolls, rising employee wages, and compliance requirements. Unfortunately, the timely settlement of these expenses is increasingly hindered by issues related to the collection of receivables, which seriously impacts the profitability and financial liquidity of enterprises.
The transport, forwarding, and logistics industry ensures reliable delivery of goods on a global scale. Although it generates high revenues, it simultaneously faces high operating costs resulting from various factors.
Costs, costs…
– As it turns out, about 40% of operating costs in the TSL industry consist of fuel charges. Let us remember that most vehicles used in road transport are powered by fossil fuels; therefore, fluctuations in oil prices have a direct impact on the operating costs of transport companies, which often leads to significant changes in budgets. Moreover, high fuel prices can seriously reduce profits, especially in periods when it is not possible to pass on cost increases to customers by raising transport service prices. – As Maciej Maroszyk, Operations Director at TC Kancelaria Prawna, explains, one of the largest is the purchase of fuel, which significantly affects the overall operating costs of the entire fleet.
In addition to fuel, maintaining vehicles in proper technical condition is also costly. This involves regular inspections, repairs, and the purchase of high-quality spare parts, which generates additional expenses for transport companies. On top of this, there are road tolls, taxes, insurance, and other liabilities that affect the profitability of transport operations.
– We also include rising employee wages in our expenses – especially if we consider truck drivers, who play a key role in the provision of transport services – adds the expert from TC Kancelaria Prawna.
Challenges generating problems
In addition to rising operating costs, transport companies encounter a number of other difficulties that significantly affect the efficiency of their operations and financial liquidity. One of the most pressing problems is the challenge associated with payment delays or long settlement cycles.
– Delays in the collection of receivables are not just a serious inconvenience, but a threat to the financial stability of transport companies. Unreliable customers or a lack of timely payments in extreme cases lead to problems with financial liquidity. In this regard, the data can be alarming – according to the BIG InfoMonitor Debtors Register, at the end of May 2023, overdue debt of enterprises in the transport sector amounted to PLN 2.79 billion. Although the standard payment deadline for services rendered is between 45 and 60 days, transport companies frequently struggle with delays in receiving payments or even a complete lack of payment. Worryingly, these unplanned time gaps are lengthening year by year. And in the transport industry, time is particularly important in the context of settling various obligations, such as paying leasing installments, paying drivers’ wages on time, or paying for fuel – explains Maciej Maroszyk.
Another challenge is unclear and imprecise terms of commercial contracts. A lack of properly formulated arrangements often leads to conflicts and interpretive discrepancies regarding settlements and payments. The Operations Director of TC Kancelaria Prawna emphasizes that transport orders are often riddled with various contractual penalties, usually financially severe. And disputes over contract terms can not only prolong the waiting time for payment but also burden the company with legal and debt collection costs.
– Troubles with debt collection and enforcement are often burdensome for transport companies. If the matter is not entrusted to specialized entities, the debt recovery process can be time-consuming and costly, and often ineffective, which deepens the difficulties associated with controlling financial liquidity. Additionally, long settlement cycles with customers can hinder budget planning and act as an obstacle to achieving other operational goals of the enterprise – adds Maciej Maroszyk.
Is there a panacea?
In the context of these challenges, it is important for companies in the road transport industry to focus on effective financial liquidity management and the optimization of operating costs.
– A well-constructed contract can help with this, e.g., by using a fuel clause that protects the company against sudden price changes. Training drivers in eco-driving will also be useful, as well as fleet modernization – newer vehicles mean lower fuel consumption and lower maintenance costs. Lowering costs can also be achieved through proper route planning, i.e., using telematics systems (TMS) and avoiding empty runs. It is also worth emphasizing cooperation with proven companies on the basis of long-term contracts rather than one-off orders. Let us not forget that using external financing, such as factoring, also helps in maintaining financial liquidity – says the Operations Director of TC Kancelaria Prawna.
Importantly, a strict analysis of customers’ payment capacity before starting cooperation can help minimize risks associated with payment delays. Striving for clear and transparent commercial contracts also brings benefits in the form of reducing the risk of conflicts and disputes. Only by effectively countering these challenges will the road transport industry be able to achieve higher operational efficiency and ensure its competitiveness in the market.
Specialized law firms also play an important role in the context of controlling and optimizing operating costs. Their advanced legal skills and experience allow for the effective resolution of problems related to debt collection, enforcement, and contractual disputes.
– In the event that a transport company encounters problems with delayed payments or debts, specialized law firms can act on behalf of the enterprise, recovering receivables from unreliable customers. These actions may include drafting formal letters, issuing payment demands to debtors, and conducting court proceedings on behalf of the client. Thanks to a deep understanding of the transport industry and legal regulations, such law firms effectively represent and defend the interests of the enterprise, striving to resolve the dispute in a way that is favorable to their client – says the expert from TC Kancelaria Prawna.