As the £4 gallon looms on the horizon and fuel costs continue their rapid progress towards the top of the fleet management running cost charts, the big question on many a manager’s lips is: how do I take control?
If drivers are still buying fuel with credit cards, or using other ‘ad hoc’ methods of payment, then the first step could be to switch to a fuel card.
Using a fuel card will give some a way of seeing at a glance who’s spending what and where. The best systems offer central billing too, which means all fuel used can be paid for in one go, at intervals which suit the organisation, and fleet managers can then monitor transactions.
The miles per gallon information collated by most card companies allows fleets to keep a valuable check on the consumption of each and every vehicle.
This in turn helps ensure vehicles are not using excessive fuel which could indicate the vehicle might need maintaining, the driver is being too heavy-footed, or is stealing fuel. It also helps fleet managers to see which makes and models of vehicle are most fuel-efficient.
Janet Eastwood, head of product management (fuel) at Arval PHH, said: ‘The key point for any fleet contemplating taking fuel cards is that without them, there is basically no way to manage fuel costs.
‘That can mean tens of thousands of pounds being spent every year with nothing in place to control it. Probably the first benefit that comes through when fuel cards are taken is the invoicing. Fleet managers no longer have to sort through expense claims, or work out an appropriate level for mileage reimbursement. Fuel costs are ring-fenced and made immediately apparent. Having obtained fuel cards, the management reporting comes into play. Line-item detail allows fleet managers to track who is buying the most fuel, what price drivers are paying, where they are filling up and how often.
‘This means trends are immediately visible – the poorly-maintained car that uses 15% more fuel than any other vehicle on the fleet and the driver who always fills up at motorway service stations rather than the cheaper sites nearby. Plus if a fleet uses alternative fuels, reporting shows how much is being consumed and how those cars compare against the petrol and diesel vehicles on the fleet.
‘Working with the card provider, this information can be used to create an integrated fuel policy. Just as fleet managers control what vehicles employees drive and how, the same level of direction can be applied to where they buy fuel and how much they use.’
One of the major benefits of fuel cards operators claim , apart from the greater control, convenience for all concerned and savings on administration, is the way they can massively reduce fuel fraud, which can cause a major drain on many companies’ finances.
The introduction of fuel cards started to combat fraudulent fuel drawing, but providers claim the advent of electronic or so-called ‘smart’ cards virtually eliminates the risk altogether.
A spokesman from card company CSC explained: ‘Our smart cards allow fleets to set the maximum fill, number of transactions and time of fuel drawings, dramatically restricting the opportunity for fraud. All are PIN protected and restricting the number of PIN tries and PIN lockout further enhances this security.’
Many smaller fleets do not use fuel cards because they fear they are only for larger operators, but Eastwood reassures them.
She said: ‘Any company with vehicles can benefit from fuel management. We have many customers who take only one or two cards. Smaller businesses might also feel that they might not have the credit rating to get these cards, but this is not so – and being pre-approved will allow them to speed up the process.’
Other important aspects of fleet management which fuel cards can help with, are income tax and VAT. On the benefit-in-kind (BIK) tax front, it is vital to keep records.
Eastwood explained: ‘It is important to keep private and business mileage separate for the increasing number of drivers who do not get ‘free fuel’.
‘Our AllStar card uses a paperless system called MCS that allows drivers to input their mileage breakdown over the phone.
‘The cost of their private fuel is then calculated by Arval PHH and automatically deducted from payroll. Just as important is that all fuel costs are now fully compliant with VAT rules. No more VAT reclaims will slip through the net.’
Some cards enable you to buy a number of different brands of fuel, while some are ‘one make’. When deciding which one to go for, think about aspects such as the range of services offered, how easily it will integrate with your systems, frequency (and flexibility) of reporting, coverage of the network and convenience for drivers. Fleets can also benefit from discounts from pump prices as some cards offer lower prices to those seen on the forecourt.
Running costs of the arrangement need to be considered, as some cards are free and others are not.
The advantages of using fuel cards