In Logistics, margins are so tight, and dollar values so high, that accepting or processing credit card payments for work performed is very uncommon. Losing out anywhere from 1% to 2.4% would be seen as an enormous cost applied to the company's bottom line.
When we had Roving Logistics we had credit card facilities available only to new, small clients, or potential one-time-only clients (normally around Christmas / Easter) in order to pre-charge them for work performed as we simply didn't want the hassle of chasing a small amount of money. We would add a small surcharge (1.5%), but it protected us from our one-time customer simply disappearing after we had performed the work.
When spending money however, we utilised credit cards for as many outgoing payments as possible. If we could pay a bill using a credit card, and were not going to be charged additional fees, we'd always use a credit card, here's why:
1. We'd collect a ton of frequent flyer points
3PL businesses incur a high number of large bills. Fuel, maintenance, vehicle registration, and more. If you can clip the ticket on all those bills and turn them into flights, you'll be laughing.
For example, spending $30k/mo through credit cards ($20k on AMEX, $10k on Visa). The kick-back from this would equate to around 40,000 Velocity points. Flying one-way from Brisbane to LAX (booked about 4-6 months in advance), generally costs around 46,000 points. So every 2.5 months we're generating a return journey, for free.
2. We'd use it to buffer our cashflow, and prevent factoring invoices.
When using credit cards, depending on the day of the month, and the type of card, you can get up to 55 days between when you pay using the card, and when you need to pay it back from your bank account. If you have a bill paid using credit card on the first day of the month, normally you won't need to pay that back till around the 20th of the following month.
In transport and warehousing, this cash-flow buffer can be the difference between needing to implement invoice factoring, and being self-sufficient. And, as I'm sure those who have used invoice factoring will agree, factoring invoices is similar to a highly addictive and dangerous drug. It's easy to start, you get short-term relief, then find it's near impossible to get out of.
So... it's all plain sailing, right?
Yes, provided you're aware of the following:
1. You must pay your credit card off in full, every month.
Those who don't understand how to correctly leverage credit cards may believe credit cards are evil, and that you'll always end up with interest payments.
This is untrue.
We would pay our bills in full, every month on the due day, so we were never charged any interest. It's easy, just set this up as an automatic payment within your online banking.
2. If a credit card surcharge is added, it's probably not worth it.
Generally, the maximum points-value you can expect by using a credit card is around 1%. This can vary wildly depending on the card, where you spend the points, how you spend them etc.
Therefore, if a business adds a 1.5% credit card surcharge, it's no longer worthwhile - so then pay via Bank Deposit, Debit card or other.
3. Personal cards generally offer more rewards than business cards
Take a look at both personal credit cards and also business credit cards. From my experience, I've found the personal cards provide a far greater rate of return than the business ones. As a small business owner, often there can be no difference between the card being in your name vs the business's.
4. Amex generally pay much higher points than Visa / Mastercard
Generally, American Express (Amex) will return 3x (sometimes more) rewards points per dollar spent than Visa or Mastercard. In our business we have an Amex we use wherever possible, and a Visa we use if they don't accept Amex. We'll often ask too, "do you take Amex?" - it's surprising how many companies now do.
5. Research various cards, as your current bank may not have a great offer
Canstar have an awesome online tool where you simply state how much you expect to spend per month, how you want to spend it, and then it'll show you the best cards to match.
Here's an example of $30k/mo spend with Virgin as a preferred airline:
Take a quick look at Canstar, if you need to signup to a new card do so (15 mins spent now may get your and the family to Los Angeles for free in the next 9 months!).
Switch everything you can over to Credit Card payments (ideally Amex), and start tracking your points balances.
At CartonCloud, we accept credit cards (including Amex) with no additional charges, so if you're not paying us with a Credit Card, contact accounts and get it switched!
Need more info on maximising points return?
Steve and his team at iFLYflat.com.au are specialists in maximising points. Give team a yell and see how they can assist you in ensuring you're using the best possible rewards given your level of spending, and where you want to travel.