Unpaid invoices and lengthy payment terms are the two biggest causes of cash flow disruption in the traffic management industry. To keep the cash coming in, many traffic management companies resort to restructuring their operations to survive. And in some cases, they even seek out business loans and other finance options.

Fortunately, there is something business owners can do. In this blog, we’ll explore how poor cash flow impacts traffic management companies, the common causes of cash flow problems in the industry, provide tips on how to fix these issues and share a new invoice payment solution that works to get SMBs back on track.

How poor cash flow impacts traffic management companies

It’s not uncommon to experience occasional dips in your cash flow now and then. But if your cash flow is impacting areas of your business, there may be serious ramifications, including:

• Poor relationships — If you cannot pay your suppliers and employees, your relationships may become strained. It can also lead to them questioning your business’s credibility.
• Dipping into personal funds — To keep up with expenses and maintain relationships, many business owners are forced to use their personal savings. While this can keep other issues at bay for a period of time, this can become a financial stress for your own household budget.
• Diminished opportunities for growth — Business expansion and growth require capital, and if you’re struggling with maintaining cash flow, you may have to rethink your future plans.
• Closing down — Limited funds can cause a business’s profits to plummet and cause them to fall behind on debt repayments and additional ongoing expenses. Once this occurs, a business may have to declare bankruptcy and close down.

Let’s look at some of the common causes of cash flow issues in the traffic management industry and what SMBs can do to prevent them.

Common causes of cash flow problems in the traffic management industry

As we’ve gathered, cash flow issues in businesses are not uncommon, though they can become a concern if not addressed properly. Many traffic management companies can experience cash flow problems for several reasons, from poor planning to late invoice payments from customers.

Here are a few common causes of cash flow problems in the traffic management industry:

Underestimating costs

Many companies in the traffic management industry underestimate the amount they need to get their business off the ground. These factors can throw a business's budget out of alignment, from hiring new staff to purchasing equipment and not planning for emergencies.

Underestimating operational expenses can financially stress a business and cause its cash flow to run dry fairly quickly. Traffic management companies can combat this by thoroughly planning and establishing a budget. They may also benefit from future-proofing their budgets by allocating funds for unforeseen expenses.

Pricing services too low

One skill many SMBs fail to master is finding the appropriate amount to charge for their goods and services. It’s crucial for a business to make a profit on its offerings without scaring away potential customers.

If your product or service is priced too low, your traffic management business may struggle to establish a healthy cash flow. This mistake can also hold an SMB back from building funds for further expansion and growth.

Stay on top of your industry by researching competitors and their pricing. This knowledge will help you determine a more competitive pricing strategy for your business. It’s also important to regularly review and update your pricing to stay ahead.

Lengthy payment terms and unpaid invoices

One of the biggest inhibitors of poor cash flow within the traffic management industry is its payment terms. Due to the nature of the industry, traffic management companies must be willing to offer clients extended payment terms and give customers as many as 30 days at a minimum to pay an invoice.

While this can help them remain competitive, longer payment terms can disrupt cash flow. If your employees are paid weekly or fortnightly, or your suppliers are demanding payment, a backlog of unpaid invoices is not ideal.

In addition to longer payment terms, non-paying customers are a huge threat to a traffic management companies cash flow. Not only is this incredibly frustrating, but it can also cause a significant delay in accruing your working capital — and going by recent statistics, it’s a pain felt by many industries across the country.

According to statistics from Debtplacer, approximately $115 billion worth of invoices remain outstanding, with up to $9 billion never making it into a business’s bank account.

As we can see, most of these challenges can be experienced by start-ups or businesses within their first few years of operation. But unfortunately, late or unpaid invoices can strike at any time, leaving traffic management companies financially vulnerable.

So, what options are available for traffic management companies experiencing issues with lengthy or unpaid invoices?

How traffic management organisations can get back on track

Owning a traffic management business means adjusting to new working conditions regularly — but when you notice a threat to your cash flow, you may be required to step into unfamiliar territory and seek alternative finance options.

Invoice financing (or Debtor Finance) remains a popular choice for many SMBs experiencing invoice issues, with major bank NAB citing that an average of one million invoices are being paid via this solution on a monthly basis. Invoice financing works similarly to a line of credit, where an SMB can use a lender to turn late invoices into funding. The SMB must then pay the lender back once they receive the outstanding funds from their customers.

Though invoice financing is the more convenient and accessible option, interest rates can range from as little as 3% to a whopping 15% and feature weekly, fortnightly or monthly repayments. If your business is already experiencing cash flow problems, massive and regular repayments could plunge you into financial difficulties.

You may also be subjected to considerable upfront fees, which you may not have the budget for. Not to mention that invoice financing only provides a business up to 80% of the invoice’s value, which may not be enough to cover your rising expenses.

Between unpredictable economic conditions and rising operational expenses, businesses are forced to choose between shutting down or applying for risky financing to stay afloat. That was until Marmalade came onto the scene.

Access invoice funds almost instantly with Marmalade

For too long, we’ve watched SMBs put their business on the line to get the financial aid they need. So we decided to do something about it and created an invoice payments platform that helps businesses receive early payment for the invoices they send almost instantly — we called it Marmalade.

Marmalade is a world-first invoice payments platform that empowers you to take complete control of your cash-flow SMBs can simply upload eligible invoices to the platform and receive early payment for a one-time fee.. Marmalade is the fastest and easiest way to provide businesses with access to their money, precisely when they want it. Here’s how it works:

• Sign up for a free account with Marmalade
• Issue invoices with Marmalade Virtual Bank Account (VBA) details
• Select invoices you would like to have paid early
• Pay a one-time fee of between 3-5% per invoice
• Get your money within one business day
• Spend that money however you please

The benefits of being a Marmalade customer

Aside from having quick and easy access to your funds, much more comes with being a Marmalade customer. Once you come on board, you can rest easy knowing our service is:

• Interest-free — Marmalade is not a lender or a credit provider but an interest-free service. Our goal is to minimise the financial stress SMBs are under by providing a cost-effective alternative to regular financing options, like loans and credit cards.
• Risk-free — When you receive early payment on an invoice with Marmalade, we take on your customer's credit risk. This gives you the confidence to continue running your business and reaching new customers without fear of non-payment.
• Transparent — With Marmalade, there are no lock-in contracts or hidden fees. We’re here to help boost your cash flow, not make a quick buck. There are no subscription fees for you and your customers.
• Streamlined — You’ll always have total visibility over the status of your invoices, whether they’ve been processed or when we’ve sent payment reminders. This means less time spent chasing up invoices and more time dedicated to growing your business.

We can help

Healthy and stable cash flow is central to a business’s survival. Business owners in the traffic management industry face financial challenges, from non-paying customers to having limited funds to pay suppliers. This has forced many SMBs to waste time chasing up defaulting customers or applying for risky financing that can cause them to spiral further.

Managing cash flow has never been easier with Marmalade. We are the first and only payment service that takes care of unpaid invoices risk-free. By signing up to Marmalade, you’ll no longer have to wait around for unpaid invoices to come through. Instead, you can look forward to having fast and easy access to your funds whenever you need them.

Discover a new way to get paid with Marmalade

Whether you’re looking to hire new staff or finally kickstart your expansion plans, Marmalade can help you get there. Marmalade is an interest-free service with no hidden fees — we want to see SMBs reach new heights, not be overrun with numerous risks. And with seamless integration with Xero, you can say goodbye to countless hours of paperwork and time, as we also automatically reconcile all payments. Our user-friendly interface helps you keep track of all your invoices and provides a status update on all your upcoming payments, so you’re never out of the loop.

Add Marmalade to your traffic management plan and create an account with us today. Or, if you would like more information on how our service can benefit your business, please do not hesitate to contact a member of our team today.