Fleet News

Fuel management: Here’s fuel for thought on fleet bills

FUEL is one of the highest costs fleets have to face after acquisition and depreciation. For decision-makers wanting to control the purse strings, fuel bills can be an ideal place to start looking for savings.

However, it is not unusual for firms running fleets to simply concede that fuel costs are outside their remit and unable to be controlled.

Rocketing fuel prices in recent years have seen some firms’ fuel budgets soaring. But by implementing a fuel policy and a regime of managing costs, fleets can easily avoid future hikes by installing strong, well-ordered policies on fuel use.

Mike Waters, head of market analysis at fleet and fuel management group Arval, said: ‘For many businesses, fuel can be the second-highest cost in the fleet after depreciation and recent high prices have added thousands of pounds to fleet running costs.

‘By saving just two pence per litre on a fleet of 50 vehicles, a fleet manager could save £3,000 per year so the incentives to reduce cost are significant. Research conducted by Arval shows that the fuel bill for a fleet of 50 cars could be equivalent to the salaries of two senior managers, so it needs to be managed correctly.

Waters added: ‘A robust fuel policy ensures that everyone in the business fully understands the organisation’s rules for buying and using fuel. The policy can include fuel pence-per litre targets and set ceilings for consumption and emissions.’

Stewart Whyte, director at the Association of Car Fleet Operators (ACFO) and also director of fleet consultancy Fleet Audits, said: ‘If fleet managers fail to implement fuel management measures they will have their finance director and possibly shareholders demanding answers.

‘Control of fuel use and costs is one of the linchpins of fleet management, but in our experience too many fleet managers just blame the Government and fuel companies for price rises, and do nothing themselves.’

MANAGING FUEL

THERE are several fleet management techniques that fleets of all sizes can employ to keep their costs under control, but all policies need to be tailored to meet the specific needs of a company.

Managing fuel use requires a comprehensive system, which needs to be updated regularly with current data.

Whyte said: ‘Pump price rises are a fact of life but through pro-active management, fuel bills can be significantly reduced.

‘Each case calls for individual consideration, but measures available include utilisation of fuel management reports to target uneconomic vehicles and/or drivers, advice on driving styles to eliminate the heavy right foot and reviewing vehicle choice lists.’

Management reports must include information on fuel expenditure, consumption, mileage and price-per-mile from drivers. Although all of this can be collated manually, it is time consuming and can often result in mistakes or mis-interpreted information.

Waters added: ‘Management information could be collated by manual logging, but this is a time consuming task and for larger fleets it is often impractical.

‘It is worth noting that research from the Institute of Purchasing and Supply shows that with a manual system processing just one monthly expense claim can cost a business up to £28.

‘Ultimately, only a fuel management system that utilises a fuel card can capture reliable, detailed information about a driver’s fuel statistics.

‘A fuel card captures information for each transaction at the point-of-sale and therefore, comprehensive management reports can be compiled and supplied at regular intervals and delivered to customers online or in paper-based format.’

FUEL CARDS

OPTING for a fuel card rather than paying with a debit or credit card and then reclaiming the money through expenses is the single most effective means by which a fleet can manage its fuel bills better.

A fuel card can be incorporated into any fleet fuel policy, enabling fleet decision-makers to manage payments, reduce fraud and monitor fuel habits.

Stephen Riggens, marketing manager for BP European Fleet Services, said: ‘Probably the main advantage of using fuel cards over alternative methods of payment is fuel management.

‘Fleet operators can gain access to a range of useful information including where fuel was purchased, the time it was bought, the quantity, the type of fuel, the cost in pence per litre and miles per gallon achieved by a vehicle.

‘Without access to such information, it is difficult for a company to have any control over its fuel purchasing and use.

‘Companies can utilise this data to monitor and control key elements of their mobile assets to achieve operating efficiencies and cost savings through reduced fuel consumption and the identification of card misuse.’

A European Commission move attempting to block VAT reclaims on business mileage could eventually leave UK fleets out of pocket (Fleet NewsNet, January 7).

The Advocate General has asked the European Court of Justice to declare the UK in violation of the 6th VAT Directive. This potentially leaves UK businesses unable to reclaim millions of pounds of VAT incurred from business mileage expenses. The European Court of Justice (ECG) is set to make a decision on Thursday (March 10).

If UK domestic law is amended as a result of any court ruling, then employers may only be able to reclaim VAT on fuel transactions via a purchasing system, such as fuel cards or company credit cards, that allows for billing to be made in the name of the fleet.

But don’t think that issuing fuel cards is a panacea to instantly solving fuel problems.

Often drivers receiving a fuel card see it as carte blanche to drive everywhere with little thought for whether the journey is really necessary by car, which can actually lead to higher bills.

As a result, fleet managers need to keep a close eye on fuel spends to ensure that drives are not abusing their new-found fuel freedom. There also needs to be a check to weed out unusual purchasing patterns, such as drivers filling up private cars using the card.

Also, it is not uncommon for firms to forget to take fuel cards off employees, leaving them happily spending on the card long after employment has ended. In this case, fleet managers need to work closely with HR departments to ensure measures are in place to stop this happening.

OTHER INITIATIVES

IT is not just fuel cards that need to be an integral part of the fuel policy. Ensuring that economical and efficient cars are offered as part of vehicle choice lists and that drivers adhere to the policy also need to be considered.

Nick Addison, Lex Vehicle Leasing’s fuel solutions product manager, said: ‘There is no doubt that fuel cards save fleets a great deal of administration time, but making sure the company car policy uses petrol, diesel and alternatively- fuelled cars in the right environments can also save money.’

Following a switch to liquefied petroleum gas (LPG) a couple of years ago, department store group John Lewis Partnership claimed it was saving almost £50,000 a year in fuel.

It began by operating 59 LPG bi-fuel cars – mainly Vauxhall Astras – as part of an environmental policy that encouraged the use of cleaner vehicles. But even if fleets have stringent environmental guidelines with managing systems installed, if the drivers do not obey the fuel policy then it is likely to fail.

Waters said: ‘All fleet operators should stress that a company car and fuel is a company resource used for business travel and, in many cases, for private travel for which drivers are accountable. Therefore, compliance with the policy is firmly part of the employee’s job.

‘Target pricing measures for fuel is another valuable tool and, with a fuel card, performance against these targets can be monitored.’

CUTTING FUEL COSTS

Items to consider when introducing a fuel policy:

  • Fuel card use
  • Advice on driving styles
  • Fuel management reports including expenditure, consumption and mileage
  • Review of vehicle choice lists
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