Expense Reduction Analysts (ERA) are calling on the fleet industry to integrate effective procurement into strategic business planning to aid their chances of success or survival in what will be an even tougher next 12 months.
In 2013, the industry will once again have to deal with HM Revenue and Customs (HMRC) business mileage audits, duty of care and rising fuel costs challenges, says ERA.
However, ERA’s smarter spending tips aim to provide business fleets with a basis for tackling next year’s key procurement challenges.
Smarter spending tips
• CO2 emissions legislation – come into force in April 2013 for writing down allowances and lease restrictions. Every company car over 130g/km CO2 emissions will face a restriction on the amount that can be written down for tax purposes. Regardless of whether you buy or lease your company cars, this will affect the overall cost of these cars. In addition, the financial element of contract hire leases will have a restriction of how much can be offset against corporation tax.
Top tip - ensure you amend your car choice policy and set a maximum CO2 emission of 130g/km.
• Business mileage – HMRC has been auditing business mileage claims procedures to ensure they are robust and not open to inflated claims. HMRC is actively looking at business organisations and, if the private/business mileage split recorded by your drivers is more than 40/60, then you are at risk of an audit by HMRC.
Top tip - ensure that your mileage auditing procedures are robust and accurately audited.
• Fuel costs – fuel prices have increased by approximately 38% since January 2010 and this trend is set to continue. Unit costs per litre are heavily influenced by duty tax and VAT so concentrating on behaviour management of your drivers will have the biggest impact on cost.
Top tip - ensure refuelling at supermarkets and ban the purchasing of high octane fuels.
• Duty of care – it is believed that as many as one in three road fatalities/serious injuries each year are from business mileage journeys. While there is no legislative requirement for business to report at work driving incidents, it is believed that responsible employers should adopt vigorous procedures to record such incidents as ‘RIDDOR’.
Top tip - consider adopting a post-incident reporting mechanism including a one-to-one interview with the driver.
Throughout the last 12 months, ERA’s team of business fleet consultants found the majority of the businesses they have dealt with had implemented cost-cutting measures in response to rising costs across their supply chain.
“Business fleets have just faced one of the toughest periods in recent memory, but what concerns me is that many organisations aren’t fully prepared for next year,” explained Sean Bingham, principal consultant at ERA.
“But relying on cost cutting isn’t sustainable, so everyone from the CEO to the fleet manager must recognise the key role they and smarter spending strategies can play, in delivering effective strategies for 2013.”
As part of ERA’s Smarter Spending for Business campaign, which will officially launch in the New Year, it will be releasing the findings of its research, Psychology of Procurement.
The survey targeted financial directors in the UK and Ireland and the results will be released in the second week of January 2013.