With many companies looking to tighten their belts in this financial crisis, and with an emphasis on all things green, companies are looking for ways to cut down on business costs and improve efficiencies. The best place to start is with your fleet, as a company’s vehicle is often one of the biggest expenses it faces.
Let’s make no bones about it: times are taxing for all businesses right now and if we are to believe the experts, things are going to get worse before they get better. The media keeps us informed about the large corporations who it seems are either going belly up, reducing staff numbers or performing badly, but small businesses (and let’s face it, that’s the majority of organisations in Australia) are also doing it tough.
Even if your fleet is no more than 10 cars, you can still make considerable savings just by making a few changes. Some of these are small and easy to implement; others are larger and may take some time to introduce (and convince your staff of their value)! All are worthwhile considering, even during more prosperous times.
What you actually need
What the business needs can often be quite different to what the business thinks it needs. Many times we’ve seen fleets made up of 4WDs or large six-cylinders, simply because ‘those are the cars we’ve always had’. Some businesses do actually need big cars to service their customers effectively, but it can also be a case of sticking to something familiar. It’s not unusual for organisations to just not realise that a smaller, less expensive car can do the job just as efficiently as a larger, more pricy one.
Culture is paramount to a business and it’s usually fairly heavily ingrained into an organisation, whether it’s the cars employees drive or the expected dress code. It’s often the case then, that staff have expectations of a certain type of car and what it means to work for that organisation. However, at some point, usually during tougher economic times, companies must make the choice between their historic approach to fleets and what is needed to keep the business operating profitably.
Change is as good as a holiday
Sometimes, a change in the business (perhaps a new location which is closer to customers or reduced staff numbers) is an opportunity to make changes to the vehicle fleet. Could you downsize the fleet size, change the make-up of your fleet or move from petrol powered cars to diesel-powered cars? What about outsourcing to a fleet management company to have them negotiate better terms on your behalf? All of these factors can be considered at anytime, but especially when you are already making changes to the business.
To truly understand the cost of a vehicle, you need to look at it from a whole-of-life point of view. That is, what it will cost your business throughout the vehicle’s entire life. This means considering not just the purchase price, but the ongoing fuel, maintenance and insurance costs, together with the likely sale price once you want to offload the car. Sometimes, a vehicle that appears cheaper at the outset may actually end up costing you more over its entire life, so it’s critical you (or your fleet company) undertake the necessary analysis to ensure your business is running vehicles consistent with its needs, while still operating at an optimal cost.
Careful management of a company’s fleet helps to optimise the life of those cars. Simple things like regular service and maintenance can avoid many of the costly pitfalls of car operation. If you keep on top of the maintenance aspect, it’s far less likely you will end up spending up big in the long term given problems are treated when they arise, rather than waiting until they are potentially more complex, and more expensive, to fix. Also, as fuel is one of the most expensive components of operating a vehicle, regular servicing and maintenance ensures the vehicle is running at its optimum fuel economy. And, regular servicing means the associated downtime is minimal, which means you’re not losing out on business for vehicles requiring substantial and significant repairs.
Of course, this degree of management also has implications on OH&S because if issues aren’t fixed as soon as they become apparent, the chance of an accident may increase.
In-life management should also take into consideration whether your vehicle fleet is running as it should from a kilometre per annum perspective. Are your drivers overusing or under using their cars? Given the implications car usage has on Fringe Benefits Tax (the more you drive, the more allowances you receive), this can impact your bottom line as well. However, there’s a fine line between driving enough to reduce your potential FBT liability and driving so much it affects the disposal value of the vehicle at its end of life (that is, how much you get for the car once you’re done with it). This applies to all fleets, whether they are owned or leased, and one of the easiest ways to manage this is through a fuel card.
One of the ways to understand how much mileage your fleet is doing, and therefore what your fleet is worth, is by tracking the odometer reading on your vehicles. One of the simplest approaches we have found to obtain this data is via a fuel card. Fuel cards are used by drivers to purchase fuel and so provide accurate information on vehicle usage. Even for small fleets, this is a consolidated way of measuring and managing your fleet usage and, without this level of transparency, you can expose yourself to possible losses as your vehicles may be clocking up more kilometres than you think.
With SMEs, credit cards are often used by drivers to pay for fuel. Yes, this means you are earning the credit card points but there’s also the risk of drivers purchasing other items with that fuel which, in the end, actually only increases your costs. And, at the end of the day, you still don’t know how much a car is being driven so cannot take steps to effectively manage and reduce costs. For example, it may be that you end up swapping cars between drivers so that one isn’t being overused but whatever the case, you need to have the necessary information at your fingertips.
Greener can be cheaper
We’ve come a long way since the four-cylinder Gemini diesels arrived in Australia in 1980! Diehard Falcon drivers, for example, are often surprised at the availability and versatility of smaller, more environmentally-friendly vehicles. There are a whole host of fuel-efficient cars out there which suit your employees’ needs just as well as a gas guzzler, but without the level of carbon emissions. Programs like Custom Fleet’s Drive Lightly offer a vehicle selector tool which helps organisations choose cars based on elements such as fuel consumption, environmental impact and whole-of-life cost.
It goes without saying that the harder a driver is on a car, the more potential there is to up your costs through increased fuel consumption and more wear and tear on tyres and brakes. By investing in driver training, be it online, classroom or on-road, you can ultimately reduce your running costs. Driver training also aids in reducing accidents with the flow-on effect of lower insurance and repair costs.
Running a fleet is never going to be a low-cost exercise, but every business, regardless of its size, has room to make a few changes that may just lower expenditure and help it navigate the tougher times we’re currently experiencing.
Take home tips
- Fit your fleet to your business’ needs
- Keep your fleet’s maintenance and servicing up to date
- Fix accident damage as soon as it occurs
- Regularly review your vehicle policy
- Understand the legislation and tax rules surrounding your fleet
- Consider using a fleet management company
- Use fuel cards
-Neil McKay is General Manager, Custom Fleet and Equipment Finance, GE Commercial Finance (www.customfleet.com.au)
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