Three Things about Fuel Cards and Reimbursements You Must Know

Written by mBurse Team Member Aug 28, 2017 7:07:00 AM

Thinking about adding a fuel card or fuel reimbursement to your car allowance? Here’s what you need to know.

Car allowances and fuel cards or fuel reimbursements are incredible perks to mobile employees. They receive a credit card to buy fuel or are reimbursed for fuel receipts. While extremely convenient to employees, these programs can be quite costly if not managed properly.

Fuel cards are primarily used for company cars. A company fleet is typically comprised of business vehicles of reasonable and economical size, allowing the company to manage costs and budget accurately. Fuel cards are a natural fit because the organization that provides the car also provides the fuel and other costs.

Some organizations, however, use fuel cards with personal cars to supplement the employee's net car allowance and help offset their expenses. In this situation, fuel costs can be more difficult to manage. Providing a fuel card or fuel reimbursement is typically the go-to solution when employees work in areas with higher gas prices, cover broad territories, or face a combination of the two. Choosing between a fuel card and reimbursement is a big decision: it involves cost, convenience, and administrative responsibilities for your organization and mobile employees.

2017 car allowance survey

The biggest challenge when proving fuel for mobile employees is company costs. 

These company costs are based on three things:

  1. The gas mileage of employees’ personal vehicles
  2. Reporting of business mileage
  3. How proactive your policy is

These factors can’t be overlooked. Below we’ll consider each factor and how it can contribute to company costs.

  1. Gas mileage

Let’s face it—your employees buy or drive vehicles that make sense for them. They buy and drive vehicles for personal choice and lifestyle. If they enjoy hunting or camping they might purchase large SUVs or pickup trucks to tow fifth wheel campers for weekend and vacation trips. Many mobile employees will use these same vehicles for business. The vehicles employees drive may be a little “more” than what they need to do their jobs. If a sales rep only needs a midsize vehicle to get the job done yet drives a V8 SUV, you are going to end up subsidizing the fuel costs with the fuel card or reimbursement.

  1. Reporting business mileage

The type of mileage log your organization uses should fulfill two requirements:

  1. IRS-compliant reporting
  2. Managing company costs 

An IRS-compliant mileage log is the best way to ensure an easy, error- and problem-free audit. You can use mileage log substitutes, for example call logs and calendar appointments, but it will take a substantial amount of time and forensic mileage log work to calculate accurate mileage and satisfy IRS requirements. This can prove especially difficult when employees have left the organization. This practice will not guarantee an easy, error- or penalty-free audit.

An appropriate mileage log will also help control fuel card costs because it provides visibility and measurement of business vs. personal use and costs. Using the business mileage, you can measure territory size, activity, and even the fuel economy of your employees’ vehicles. This information can be used to develop a fuel card/reimbursement policy and can prove to be more useful than either the number of gallons and cost for each month.

  1. Your fuel card/reimbursement policy

Your fuel card or reimbursement policy will also steer and help control costs. Policies should treat everyone equitably while helping control administrative work and costs. These policies may take the form of placing a cap on the number of times a week a mobile employee can fill up. Organizations may also implement a policy of limiting the days of the week one which the fill up occur. For example, you can limit employees to either Friday or Monday fill-ups, but not both. This will curb the amount of weekend driving.

If you’re going to provide a car allowance and fuel card or fuel reimbursement with personal vehicles, it pays to take proactive steps to find tools that can assist you in managing your fuel costs. It can also be worth it to consider adopting a policy that can replace your fuel card while still providing a robust benefit to mobile employees.

To learn more about alternative approaches to a fuel card or fuel reimbursement, click here.

The ultimate guide to paying a car allowance or mileage reimbursement

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