Fleet Focus on ROI
Depending on where you are in Aust, we have been feeling the different levels of COVID19 impacts now for about 18 months. When it comes to running a business, many organisations are struggling from the direct consequences of lockdowns, reduced sales and the legacy of fixed costs.
As we know, an organisation’s motor vehicle fleet is often one of those major costs. While still one of the biggest expenses, in numerous cases the same Return On Investment (ROI) is not being achieved - vehicle utilisation may be down and accordingly ROI is negatively impacted.
While some impacts may be temporary, others will be more long-lasting, such as the number of people working from home and the growing acceptance of on-line meetings that result is less use for company vehicles.
So, it’s no surprise to see many organisations are now putting their fleet operations under the spotlight, assessing their requirements and looking for opportunities to cut costs.
How is your fleet performing contributing to your bottom line?
While the type of vehicles used in fleets has changed considerably over the last 20 years, some organisations are still very ‘traditional’ in their fleet management practices and slow to reign in the costs.
I often believe this is partly a result of the ‘sense of entitlement’ and status that has long been a factor with employees and their company vehicles. While Novated Leasing has changed this landscape and vehicle subscription may play a bigger role in the future, there are still plenty of fleets out there that could be doing more to drive an improved Fleet ROI in these challenging times.
To optimise your Fleet ROI the first issue to consider is of course the fleet size – how many vehicles do you have and how many do you really need?
The size of your fleet is a critical decision that will impact directly on your operational and financial efficiency, profitability and ultimately stakeholder engagement.
So, is your vehicle supply greater than the demand? Are vehicles now sitting idle more often? Are employees with company vehicles now working from home and meeting with customers face to face less? These are all examples of under-utilisation and its key to your ROI.
Disposing of excess vehicles will have recurring benefits beyond the cash injection from sale; reduced running/operating costs such as fuel, registration, insurance etc.
While pivotal to driving ROI it seems that utilisation is sometimes not measured and therefore difficult to manage. Or is it sometimes not measured because we don’t want to tackle the results?
What about the vehicle mix in your fleet? Do you have a lot of larger vehicles that are often used by one person? Are they only doing short trips? Maybe there are options for introducing smaller, more cost-effective and fuel-efficient vehicles.
Fringe Benefits Tax (FBT) is another major area of focus in managing and/or reducing costs. While many organisations have shifted their ownership of ‘benefit vehicles’ to employees using Novated Leases, there are a range of other aspects to consider to reduce FBT liability.
When it comes to calculating FBT, the Statutory Method is the preferred method…..and coincidentally the easiest. But there are circumstances where the financial benefits of using the Operating Cost method would result in savings.
Companies also seem to be reviewing employee contributions to FBT, where traditionally they may have taken full responsibility.
While COVID has had some impacts here too, the sharing economy is alive and well and provides options that may be worth considering, depending on your circumstances:
- Company Pool Vehicles
- Rideshare – Uber, Ola & Taxis
- Carshare – GoGet
- Car Subscription – Carbar, Carly and Hello Cras
Where employees only require a vehicle intermittently it’s likely you will be much better off providing options to share rather than retaining a vehicle where the ROI just doesn’t stack up.
These are only a few thoughts in an exhaustive list of motor vehicle expenses - driving optimal Fleet ROI often requires a comprehensive approach and must be tailored to each organisation and its fleet.
A review of your fleet management strategy and the practical considerations are potentially a daunting prospect for many. This is another reason why it is sometimes overlooked – yet increasingly we suspect that it is a topic of discussion around the boardroom table when financial performance is under pressure.
For independent expert advice or to conduct a Fleet Review, contact us at Fleet Advisory.