The Accounting Reality Behind Last-Mile Delivery

The last-mile delivery industry is ultimately a high-risk cash flow and cost control business that also moves physical packages. There is no room for financial ambiguity, where the cost of living is high, and the density of people is high, especially since margins are typically very low. 

While e-commerce growth has been explosive for many companies, there is a time delay between expensing operational expenses today. Thus, receiving payment from customers later will destabilize many busy operators’ businesses relatively quickly. 

The only way for a company to scale sustainably is to comprehend the financial realities of its business, where simple unit economics are very dependent on fuel consumption or failed deliveries. As such, Strategic Accounting is no longer just something done by an accounting department. 

It will be the primary driver for successfully navigating the very complex, very costly global logistics environment.

KEY TAKEAWAYS

• High volume often masks cash flow gaps; success depends on collection velocity rather than just total sales. 
• Labor and fuel must be tracked per drop to identify the compound effects of small operational inefficiencies. 
• Expenses in delivery hit immediately, while revenue often lags by 30-60 days, requiring active working capital management.

Why Last-Mile Delivery in Singapore Is Financially Complex

Operating services last mile delivery Singapore means working inside one of the most efficient but expensive urban environments in the world. Delivery costs increase as limited space, regulated labour, high compliance standards, and low levels of tolerance for delay are added into the equation.

From an accounting standpoint, three characteristics define the sector:

• Costs are incurred before revenue is collected
  
• Unit economics are sensitive to small inefficiencies
  
• Cash flow timing matters more than headline profitability
  

Costs of delivery may be either fixed or competitive, however they cannot be predicted accurately and will vary daily. Costs relate to: fuel, driver wages, maintenance of vehicles, and costs related to parking; ERP subscription fees; and late delivery penalties.

This creates a structural timing gap that accounting teams must actively manage.

Revenue Is Volume-Driven but Cash Is Not

The volume of deliveries does not equate to a healthy cash flow for most last-mile delivery operations. It is because they are providing services to call upon via an invoice to their corporate client on a monthly or bi-monthly basis.

The terms and conditions of those invoices usually result in payment for services not being received until at least 30-60 days after service delivery has occurred.

From an accounting perspective, revenue recognition alone is insufficient. What matters is collection velocity. A growing accounts receivable balance can quietly consume working capital even as reported revenue increases.

Strong accounting practices in this space focus on:

• Invoice accuracy at the point of service
  
• Tight reconciliation between delivery data and billing
  
• Early detection of delayed or disputed invoices
  

Without this discipline, scale magnifies cash strain rather than relieving it.

Cost Structures That Require Constant Attention

The costs associated with delivering last-mile freight differ from those incurred by long-haul freight delivery operations. When there are minor inefficiencies in either operation, the cost of said inefficiencies is dramatic due to narrow profit margins and the high number of repetitions of a process.

Labour as a Variable Cost

In Singapore, labour is both regulated and competitive. Driver availability fluctuates, overtime rules are strict, and reliance on contractors introduces variability.

From an accounting perspective, last-mile delivery operations should be tracking labour based on each individual delivery performed and not at the level of employee headcount. The implementation of labour cost per delivery metrics will assist in identifying inefficiencies that are otherwise obscured when simply looking at holistic amounts of payroll.

Poor route planning or uneven workloads show up first in labour overruns.

Vehicle and Fleet Expenses

For most operators of last-mile delivery vehicles, costs associated with maintaining and operating a fleet include more than just the cost of fuel. Other costs include: insurance, maintenance, depreciation, and downtime.

Accounting teams need visibility into:

• Cost per vehicle per day
  
• Maintenance trends versus usage
  
• Replacement timing versus repair escalation
  

Treating fleet expenses as fixed overhead rather than operational drivers often leads to underpricing delivery contracts.

Technology and Platform Fees

Last-mile delivery companies utilise various forms of technology such as routing software, proof of delivery systems, customer dashboards, and integration tools to support their last-mile delivery business in Singapore.

Although these technologies may seem like small pieces by themselves, they still create ongoing cash obligations that must align with revenue timing. They should also be accounted for as variable costs instead of fixed costs.

The Hidden Accounting Risk: Failed Deliveries

Failed or delayed deliveries have a direct accounting impact. Reattempts increase labour and fuel costs without increasing revenue. In some contracts, they trigger penalties or reduce billable rates.

As far as financial control goes, operators must track the cost of failed deliveries; it is a performance measure as well as a significant driver of profitability loss that most operators are unaware of.

Accounting data linked to delivery performance allows pricing and contract terms to be adjusted before losses accumulate.

Client Mix Shapes Financial Stability

Many last-mile operators in Singapore have a concentration risk on a small number of large customers. This has more of an impact on cash flow than it does on profitability.

Large clients often negotiate longer payment terms and stricter service-level agreements. While volumes are attractive, delayed payments or disputes can destabilise cash flow.

Accounting teams should regularly assess:

• Revenue concentration by client
  
• Average payment days per client
  
• Dispute frequency and resolution time
  

Diversification is not just a sales strategy. It is a liquidity strategy.

Forecasting Must Include Operations Data

Traditional cash flow forecasting based only on historical financials is insufficient for last-mile delivery. The requirement for cash is also affected by volume fluctuations, seasonality, promotional spikes, and regulatory changes.

Effective forecasting integrates:

• Expected delivery volumes
  
• Labour availability trends
  
• Fuel price sensitivity
  
• Vehicle maintenance schedules
  

When accounting teams work closely with operations, forecasts shift from reactive to anticipatory.

Financing as a Tool, Not a Crutch

Many Singapore delivery operators use invoice financing or short-term credit facilities to bridge timing gaps. These tools can stabilise cash flow, but they introduce cost and dependency.

From an accounting standpoint, the financing of the last-mile delivery operation should be based on the quality of receivables and contract certainty. Growth in financing should not exceed the revenue growth; otherwise, it would indicate an operational structural problem rather than a growth opportunity.

The role of accounting is to ensure financing supports scale rather than masking inefficiency.

Pricing Discipline Starts With Accounting Insight

Pricing for last mile delivery is generally set by the marketplace; however, margins are safeguarded through internal discipline. Accounting information can provide insight into which routes, customers and delivery modes create cash as well as those that consume cash.

Without this insight, operators compete on price alone and discover too late that growth is unprofitable.

The Reality Behind the Numbers

In Singapore’s environment for last-mile delivery, success is more based on financial control than demand. Volume provides insight into growth potential, but disciplines provide the ability to sustain those opportunities. 

For operators who align accounting with their operations, they create a better understanding of their unit economics. Thus, they can proactively manage their cash flow as well as adjust their prices before they come under pressure. 

Those who don’t can experience growth without having a stable platform to support that growth. In one of the most advanced logistics markets globally, accounting plays a vital role—not as a back-office function—but as a critical strategy.