Car Allowances and Reimbursements: Is Your Vehicle Program Outdated?

As the U.S. workforce has grown increasingly mobile, new technologies and practices have developed. But many businesses still use outdated methods to support car allowances, reimbursements, and fleets. Here's a list of outdated vehicle programs and updates that deliver ROI.

Outdated business vehicle programs

For businesses with employees who travel by vehicle a lot, a number of methods exist to support their work financially. Many of these methods are outdated in today's economy. Let's look at a few:

1. Taxable car allowances

Many businesses still pay a taxable car allowance because it is easy. However, that tax burden reduces a typical allowance by 30-40%. Switching to a tax-free FAVR program can allow the organization to reinvest the money in its employees and operations.

2. One-size-fits-all programs

Whether a fixed car allowance, a standard mileage rate, or a fuel card, one-size-fits-all programs ignore reality. Different workers incur costs at different rates due to geographic cost differences and different amounts of driving. A FAVR program is an up-to-date approach that resolves these problems.

3. Manual mileage entry

Vehicle reimbursements and company fleets both require mileage logs to verify business use. Technology can automate this process through mileage tracking apps. However, many organizations still require workers to enter numbers in a spreadsheet or an expense system. Automation saves time and money.

4. No data systems

Many organizations pay an allowance or mileage rate that never undergoes review. Rather than using cost data to optimize the amount, the company pays the same amount year after year or adopts the federal mileage rate. A more flexible program built on data saves money and increases productivity and efficiency through data analytics.

5. Clumsy risk management

Some organizations verify employee auto insurance and check motor vehicle records. But they use time-consuming methods or perform checks infrequently. Some skip these risk management procedures entirely. But today's software-based vehicle programs streamline the process. An investment in technology can save money and grief later on.

Business vehicle best practices

Here are a few steps your organization can take today to update its business vehicle program. These steps can save money, make the organization more efficient, and increase productivity of workers. The more steps you take, the larger the overall benefit.

• Adopt a tax-free FAVR plan - A FAVR program delivers data-driven, tax-free payments to employees who drive personal vehicles for work. The payments are flexible, geographically sensitive, and always accurate.
  
  
• Automate mileage tracking - This is a win-win. Employees are released from a time-consuming task, and the employer gains a tool that reduces overpayments. Many apps also come with productivity tools as well.
  
  
• Get reimbursement software - Don't just get a mileage app; adopt a comprehensive platform for reimbursements. Management gains access to productivity reports, business analytics, and streamlined approval. 
  
  
• Integrate risk management - Leverage technology even further to obtain continuous monitoring of driver records, insurance coverage, and driver safety. A little accountability can go a long way.
  
  
• Hybridize your program - Some organizations benefit from operating multiple plans. Infrequent travelers may get a mileage rate, while frequent drivers get FAVR. Or some employees may transition away from a company car to a FAVR plan. Optimization is key.

Benefits of technology based vehicle programs

Adopting technology-based supports for vehicle reimbursements can yield a range of benefits. Here are a few:

• Savings immediate - Removing tax waste optimizes payments to employees. This move can save an organization 20-30% in the first year.
  
  
• Efficiency increase - Automating mileage tracking and approval decreases administrative time significantly for drivers and managers.
  
  
• Productivity enhancement - Adding software with business productivity data reporting can provides insights and open avenues for coaching.
  
  
• Risk reduction - Monitoring insurance and driver records decreases the risk of liability for a costly employee accident. 
  
  
• Employee retention - When employees are compensated fairly and have tedious tasks removed from their plates, they stick around.
  
  
• Competitive advantage - Organizations that stick with outdate programs are not as competitive as those with modern tools.

Updating an outdated vehicle program

Now is a great time to implement changes to update your business vehicle policy. mBurse provides consultative services that can assist an organization with these decisions. Here are a few helpful tools to ask for:

• Benchmarking data to optimize reimbursement rates
• FAVR plan development and administration
• Mileage tracking app and admin software
• Risk management services (MVR and insurance checks)
• Implementation and change management guidance

Contact mBurse today for more information, or try out one of our calculators to determine what kind of savings your organization could gain.