How Your Personal Use Chargeback Policy/Tools are Killing Your Costs

Written by mBurse Team Member Jun 29, 2017 5:12:00 AM

Providing company cars: It’s time to check your personal use and chargeback policies

If you own a car, you’re all too aware of the need to perform regular maintenance: oil changes, tire rotations, and tune ups are essential to keeping your vehicle in the best possible condition and avoiding expensive repairs later. The same is true of a policy governing company cars: go too long without “tuning up” your policy, and you’re setting yourself up for some costly problems. 

If you provide employees with a company car, when was the last time you updated your personal use and chargeback policies? Have you stopped to consider the fact that some basic “maintenance” could help you to control your fleet costs?

There are two fundamental challenges that frequently stand in the way of the effective management of a personal use policy:

  1. Outdated Policy (It’s 2017—Why are you still wearing bell-bottoms?) 

It’s highly likely that your policy was designed in and for a different era. Perhaps at the time your policy was first introduced, providing employees with company cars was simpler because costs were relatively minimal and could be more easily controlled. The current business environment presents a more complicated situation. Gas and insurance costs have risen, and depreciation associated with vehicles has accelerated. Plus, increased fuel efficiency means employees may take more liberties by driving the company car for more personal trips.

These developments make it increasingly likely that your organization is subsidizing at least some personal use costs. The IRS provides organizations with different methods for determining the value of personal use of a company vehicle. But no matter what personal-use chargeback method you choose, it will rely heavily on the effective and accurate reporting of business and personal mileage. Any under-reported mileage (and there may be more than you think) is going to cost you. 

  1. The Wrong Tools (Why are you bringing a bazooka to a knife fight?)

Tool 1: The mileage log. 

Historically, employees reported vehicle use on a mileage log, operating on the honor system. The process is easy and hasn’t changed much in 30 years. Employees simply keep a log of business and personal mileage, and that’s it. Whether employees report mileage on paper or enter it into fleet software, the process relies entirely on accurate reporting. However, employees may reduce the amount of personal mileage they record in order to reduce their costs and the time it takes them to manage the mileage log.

Mileage infographic

Tool 2: Telematics

Advanced software solutions like telematics risk overcomplicating a very simple problem. These tools produce reams of data that go beyond simple mileage, such as driving speeds, braking habits, and cornering tendencies. Capturing this information can be helpful for delivery drivers, service vehicles, big trucks with valuable cargo, and

possible high-risk drivers. However, this tool is total overkill for a sales rep or light service rep driving a company vehicle for both work and personal purposes. 

Tool 3: Traditional GPS Systems

Traditional GPS systems provide an alternative means to measure mileage, but they can violate privacy and are prone to human error. Companies must be cautious they don’t gain acce

ss to information that reveals employees’ activities outside of work, such as personal medical appointments or political and religious associations. Access to this information potentially violates the employee's Fourth Amendment rights. You also have to consider what happens when the phone dies, the cigarette lighter is not working, or a device is left at home or simply not plugged in?

There are much easier and foolproof ways to manage mileage tracking. 

With the increased government focus on making companies aware of the challenges associated with mileage logs and the increased audit focus on the misuse of fringe benefits, now is the time to automate the tedious administrative task that is mileage tracking and proactively eliminate excess costs and fraudulent activity. 

If you want to tune up your personal use and chargeback policy without stripping out employee perks, or would be interested in hearing what alternatives we offer, call mBurse and ask about our fleet solutions today.

Your companies risk is based on your employees that drive.

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