With so many costs of doing business on the rise, here are six ways to reduce your organization's overall fuel costs.
Why fuel costs can add up even when gas prices are stable
Since the spike in gas prices in 2022, national averages have hovered in the $3 to $4 per gallon range. Businesses with fleets and employees who drive personal vehicles for work have adjusted to the new normal. But the overall financial picture remains challenging due to inflation in so many areas of expense.
Drivers of personal vehicles for work may ask for a gas card to help offset the high costs of insurance, maintenance, oil, and tires. But this is not typically the best way to go. Fuel costs are one area of a budget that can be controlled because more factors are involved than the price per gallon at the pump.
Employees who already receive a fuel card or reimbursement may use that benefit to subsidize personal use. They can justify it as a way of offsetting the larger increase in vehicle-related costs that they face due to inflation.
6 ways to rein in business fuel costs
There are several steps you can take to directly or indirectly reduce how much you are paying for business fuel costs, or prevent that area of your budget expanding under pressure of broader inflation.
1. If you are paying a taxable car allowance, STOP.
Instead of issuing a fuel card, you can recoup 25% or more of business vehicle costs by switching to a non-taxable program. And you can bump up the overall amount employees receive. A tax-free FAVR allowance is by far the most cost-effective option.
2. If you already offer a fuel card, implement a stricter policy.
Add limits to how much fuel can be pumped per week or on which days it can be pumped. No Friday fill-ups without permission, for example. Enforce penalties for violations.
3. If you offer a fuel card or a company vehicle, modify your personal use policy.
Make sure you are enforcing a clear policy that charges back employees for the personal use of fuel or company-owned vehicles. You'll need to use a good mileage tracker to keep track of business travel and separate it from personal use.
4. If you are not job costing, add a fuel surcharge for services rendered.
It is fairer for customers to pay for fuel expenses than for employees to sustain these costs. This will shield your company from any spikes that occur like the one in the spring of 2022.
5. If you do not use a mileage app, adopt one.
Requiring employees to use a mileage-tracking app in order to receive their car allowance or reimbursement can provide both accountability and helpful data on business productivity and fuel use.
6. Adopt a data-driven approach to calculate a new rate.
In the era of mass data collection, it is possible to pinpoint the optimal reimbursement rate for any employee, based on their location and job responsibilities. mBurse can supply this data – or calculate the rate for you.
California labor laws and fuel costs
If you have employees that work in a state like California that indemnifies employees from all business expenses and has high gas prices, then you need to take a close look at your policies. In a state like that a FAVR allowance will be far more cost-effective than paying the IRS mileage rate.
Even if you do not have employees who work in one of those nine jurisdictions, you still face the issues of fairness to employees and retaining good workers. How will you ensure that employees are shielded from inflation in vehicle costs while also preventing fuel costs from expanding too far?
