HomeFinanceCashflowSaving money on wheels and gas: improving fleet efficiencies

Saving money on wheels and gas: improving fleet efficiencies

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.

Whole-of-life cost
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.

In-life management

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.