Chris explains that all of the client relationships he builds start with a conversation. His team asks the clients about their pain points, and learns about the geography they cover and what their financial needs are. These are important questions because they help guide not only what cash management products they might need, but also what teams they need to engage to help see success.
Navigating economic fluctuations
One major challenge that many industries like transportation face involves economic fluctuations on a national and global scale, particularly in oil and gas. The transportation industry is particularly vulnerable to economic shifts due to the simple fact that their clients consist of other businesses who are also distributing goods that can be impacted by economic downturns. Some of these negative effects include the inability to acquire client work and not getting paid on time for the work that’s been done. This can lead to cash flow challenges that consequently disrupt the ability to pay suppliers and contractors on time and can eventually lead to bankruptcy if unmitigated.
To address these issues, transportation companies have resorted to sometimes taking a lower percentage of the truckload revenue if their driver contractors are willing to wait longer for payment. Other solutions have also included companies opting to stretch out their own payments to suppliers while tightening their credit terms for clients.
Finding the small advantages in diversification
With competition so tight in this industry, even the smallest competitive advantages can mean better operating margins and improved ability to weather economic slumps. Diversification and expansion can be key in this regard.
Geographic expansion is one of the best advantages a transportation company can utilize, but it’s also one of the most difficult. In this capital-intensive industry, expansion can mean investing a lot of money with no guarantee of outcome.
Chris recollects working with clients on expansion strategies and finding ways to make expansion economically viable. One strategy his team often helps companies with is the hub and spoke model, which involves locating where companies have a critical mass of clients and opening terminals and bases in close proximity to these clients. This helps facilitate ease in transport to those client locations and helps open new opportunities with other nearby clients those companies would not have otherwise interacted with simply because of distance.
“As our clients expand and find ways to better serve their customer base, they’re able to offer a wider range of services and create customized local solutions based on their customer needs,” says Chris. He explains that, much like how his team approaches cash management with their clients, transportation companies know how important it is to cater to their customer needs and not try to fit those needs into pre-determined boxes.
“When you understand individual needs, you can serve the client base much more efficiently and build long-lasting relationships.”
Managing cash flow and knowing where to invest
With any expansion comes the need to invest in new equipment and technologies. Keeping a reliable fleet of transport vehicles means being up-to-date with GPS, driver-assist and electronic logs, which can add up fast. Having these technologies in place can add to the competitive advantage needed to facilitate expansion and keep reaching new customers. Equipment financing also helps to free up capital for purposes that go beyond just buying new equipment. Lines of credit can also be a key tool for helping to address cash flow shortfalls, however, they can be challenging for a small business to obtain.
“We work to engage other specialized teams, like equipment financing,” says Chris. “We’re lucky at CWB to have so many different business-focused and specialized teams with expertise that we can tap into. When we work collectively, we can create tangible results that benefit our clients’ businesses in ways they never expected.”
For CWB clients, Chris explains how the bank developed the CWBdirect® Online Banking platform. This is a completely customizable platform that gives an overhead view of all business banking investments and assets. It can even connect to additional businesses’ and subsidiaries’ activities. Having an all-encompassing view of a business’s finances makes it easier to know what’s available to invest and how best to move that money to keep the business moving and growing.
“With a major investing point in transportation being mergers and acquisitions, this tool becomes even more valuable,” says Chris. “Moving company assets becomes simpler and more streamlined because the acquired business can now seamlessly move to the established banking dashboard and the new capital gained from the acquisition is immediately integrated into the overall business.”
A bank can be a lot more than just somewhere a business puts its money. Much like the other vendors a business works with, there’s an opportunity to be a partner with a bank. If the business succeeds, then the bank succeeds, so there’s a vested interest in seeing the kind of growth and expansion owners want their businesses to experience.
“CWB does have a package of cash management products specifically tailored for the transportation industry that plenty of companies have found to be highly valuable,” says Chris. “But we also don’t believe in one-size-fits-all solutions. Every business is different, so your cash management solutions should be as unique as your company.”
Learn more about CWB cash management solutions at EaseYourMind.ca.