Why fuel management is a must for small firms

For any business operating vehicles, fuel is a significant expense and current pump prices suggest that this situation isn't going to change in the near future. Making up around 25% of the cost of owning a vehicle, and second only to depreciation, fuel costs must be controlled which is where fuel cards come into their own.

Under a pay and reclaim system, drivers purchase fuel using their own funds then submit an expense claim before they are reimbursed. This can mean that drivers end up out of pocket and makes it difficult for an employer to influence how and where fuel is bought, or to extract information about driver performance.

Allocated to individual drivers or vehicles, fuel cards provide a method of payment that removes this issue, ensuring that the company only pays for fuel that is purchased and drivers don't need to dip into their own pockets. What's more, they are an important tool in capturing powerful data.

Without an accurate picture of current fuel expenditure it can't be properly managed, let alone reduced. Fuel card reporting shows what, where, when and how much fuel is being purchased each time the card is used. This highlights the mileage that drivers are completing as well as their fuel purchasing habits from which the business can take action.

For example, big savings can come through directing drivers to the cheapest fuel forecourts. In conjunction with information provided by a fuel card supplier the business can set a price-per-litre target which drivers aim to meet when they fill up. As a means of doing this, drivers will often be directed to low price forecourts. The fuel card captures data on drivers who do not meet this target and an exception report compiled, allowing businesses to identify problem drivers and take swift action. While the savings vary, an SME fully committed to this strategy can remove around 10% of fuel costs.

Fuel cards also reduce the administrative burden on a business through VAT invoicing. Collating receipts from different drivers for fuel purchases takes time and can mean that businesses don't claim back all of the VAT that they could. Fuel cards eradicate this problem because a single invoice makes it easy to recover the VAT on fuel purchases. This removes the need for drivers to retain and submit individual receipts or for the company to process them.

Businesses care more about the environment than ever before, often because it has a direct impact on their costs, or because their customers set environmental targets. Fuel cards can be used to measure carbon footprint because they collect management information on the number of litres of fuel used and type of fuel purchased. This information is essential to identify current CO2 emissions and then to measure ongoing reductions.

While these things can provide great cost and efficiency benefits to a business, remember that not all fuel cards are the same and some are better than others. It is important to consider:

1. Route deviation - many fuel cards operate through restricted networks so drivers can only purchase fuel from a particular fuel brand. While the Arval fuel card can be used at nearly all UK fuel forecourts, most other fuel card providers can not match this level of coverage. With a limited network, drivers have to travel extra distance to find somewhere they can fill up with their fuel card wasting time and fuel so increasing your costs.

2. Low cost sites - some fuel card networks don't include the low cost sites (including the supermarkets). The price differential between the most expensive motorway site and the cheapest supermarket can be more than 8 pence per litre which demonstrates that businesses can make significant savings by encouraging drivers to refuel at these sites.

3. Support - not all fuel card providers are able to provide the same level of impartial support, advice and information that you need to make the most of your fuel card. Some branded fuel card providers have a vested interest in selling more fuel which may not be in your best interests.

4. Be wary of bunkered sites - some fuel card products direct drivers to bunkered fuel sites. These are often not easy for drivers to use with some only suited to HGV vehicles. Again this is a small network which means that drivers often have to travel several miles to get to a site where they can fill their vehicle up.

5. Watch out for hidden costs - make sure that any quote is inclusive of VAT. Some aren't so the quote appears to be cheap when in reality it isn't. Also watch out for any handling fees that could bump up the price that you are paying.

For more information please visit http://online.arval.co.uk