Fuel is one of the biggest controllable expenses in any fleet operation but for most businesses it’s one of the least controllable expenses. Money slips away through out-of-control buying, through poor fueling practices, and through the lack of any real-time insight into the fueling practices of drivers. The sad truth is that the savings are present, just waiting to be mobilized through the proper mix of policy, technology and accountability.
These “rules of the road” for smarter fuel purchasing, driver limits and real-time visibility of expenses are not difficult concepts. They’re effective solutions and are already being adopted by forward-thinking Fuel card programs that automate fleet tracking to reduce fuel expenses without compromising quality.
The Hidden Cost Problem Most Businesses Ignore
If you ask a fleet manager the cost of fuel last month for his business, most will be able to tell you how many dollars, or whatever the unit is, that his business consumed. They will tell you about what they actually had to spend it on and that answer becomes a lot less sure. It’s in that difference between the two that’s the real problem: total spend and justified spend.
Many organisations are not aware of unauthorised fuel purchases. All these things, when done separately, may appear to be small habits.They are all small habits when done individually. Together, in a fleet of twenty, fifty or a hundred vehicles they add up to substantial annual losses that are not easy to spot on one line of a financial statement.
Without rules in place and in-vehicle visibility, fuel expenses grow to take up any space policy provides. The first step in tightening the space is to know where the money’s going before you try to change its direction.
Create Fuel Purchasing Rules for Construction Projects
The first step of any cost reduction plan is the fuel purchasing rules. A fuel card that has no spending parameters attached to it is more of a blank check given to each driver on the fleet. Rules take that blank check and make it a managed tool.
Where fuel can be bought, what type of fuel is authorized, and where and when can purchases be made are the three most important purchasing rules.
One of the quickest methods of cutting the cost of purchasing per litre is to limit the choice of company to approved fuel networks. Fleet fuel card providers work with the fuel network in order to provide reduced pump rates for fleet customers that are not available to the general public. If the drivers shop elsewhere — and even if they are paying a similar price — the business doesn’t get the network discount for each litre. While there is the risk of such goods being stolen if purchased from the approved locations, the risk is eliminated as soon as they are locked.
Many fleet managers are unaware of the importance of fuel grade restrictions. There is a huge price premium that is not justified for most commercial vehicles operating in normal circumstances for premium and high octane fuels. Eliminating temptation and cost in a single stroke of the pen: by specifying the authorised fuel grade by vehicle type and enforcing that specification through card restrictions.
Another level of control is added in the form of time of day purchasing restrictions. Buying fuel after 11pm on a Sunday or away from a driver’s route are signs to look into. If rules are set to flag or block an out-of-pattern purchase, then there is less opportunity to misuse them and a built-in audit trail in case out-of-pattern purchases occur.
Defining Driver Limits That Actually Reflect Reality
When driver spending limits are not set properly, they will be ineffective. If limits set too high, then the control is meaningless. Restrictions put in place that are too low lead to excessive exception requests, drive down driver compliance and result in administrative overhead that offsets the time savings that the limits are supposed to provide.
Data is the first step to meaningful driver limits. Historical vehicle-type fuel consumption, average route distances, and fuel price benchmarks by region are needed to establish fuel consumption limits that are not simply “supply and demand” but based on actual operating conditions.
Individual vehicle limits (IVLs) can be more effective than the simple dollar limit, as they adjust to changes in fuel prices without the need of regular manual adjustment. If pump prices rise or fall, there is an operational limit for a driver who has been authorised to buy 80 litres per week.
More precision is added through tiered limits based on driver role. A long-haul driver on interstate routes is different to a local delivery driver who drives 150K a day. When applied to both sides, it has issues both ways: not enough for one, too much for the other. However, tiered structures, which don’t create any complexity, are available to address this if the underlying consumption data is correct and is reviewed regularly.
Most importantly, limits shouldn’t be rigid. Legitimate fuel needs are impacted by seasonal route changes, new vehicle allocations, and expansion into operations. A quarterly limit review process keeps restrictions relevant and current instead of impeding or creating loopholes that have crept by unnoticed.
Expense Visibility: The Key that Unlocks Everything Else
Rules of purchase and limits of drivers are the structure. That structure only becomes meaningful when you can see its expenses. Even the most stringent policy framework is blind, without the ability to know in real-time what fuel is being spent, by driver, vehicle, location, and transaction.
Today’s fleet fuel management solution offers just that visibility. Transaction level reporting displays each purchase as it occurs with the parameters applied to it for that driver and vehicle. Exceptions — buying outside of approved locations, filling with fuel that is not compatible with vehicle specs, transactions at times not considered are apparent immediately instead of being listed in a reconciled statement weeks after which no one is able to properly interrogate.
Dashboards which aggregate expenditures by department, by driver or by type of vehicle convert raw transaction data into knowledge that can be acted upon. When a fleet manager knows, not suspects, that three drivers in a certain area are always driving 25% faster than their peers, he has a clear starting point for a targeted conversation, instead of an elusive collective suspicion floating in a cell of a spreadsheet.
Policy flags are automatically closed in real time when an exception alert comes straight to a manager. When a driver completes refueling, the appropriate manager receives a notification, and can follow up right away before it becomes a habit and the cost adds up.
Seamless integration with integrated expense management solutions guarantees that fuel information is synced with financial reporting, in payroll and tax compliance. That integration removes the need for manual reconciliation, reduces accounting errors and brings in the clean audit history that’s required by internal governance and external compliance.
The Compounding Effect of Getting This Right
The actual, realized savings on fuel from “smarter purchasing rules,” “accurately calibrated driver limits” and “genuine expense visibility” don’t come in one dramatic swoop. They add up – transaction by transaction, week by week – to a steady improvement in fleet cost effectiveness. Companies that use all three components regularly achieve savings of 10% to 20% on fuel spend in the first year of use.
In sum, it is real money saved from a cost-center that had no capacity to resist waste, at least in a measurable way; and that is for a fleet that is spending $500,000 per year on fuel. The tools exist. The next question that remains is how much time should be spent waiting to use them?
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