What’s Draining Fleet Profits?
Fuel prices charged by trucking fleets have been under the microscope since the Pilot Flying J corporate headquarters were raided by the FBI and IRS officers in April 2013. As a result fleet management companies are changing the way they managed their fleets.
The investigation highlighted the impact and awareness that slight changes in fuel pricing can have on the bottom line, which has become a greater focus of management firms. There are many factors in the fuel buying decision that can lead to losses including the timing of purchases, the tracking of pricing and errors in invoicing.
A new FuelQuest survey found that 24% of surveyed fleets had changed the way they manage and review fuel invoices as a result of the scandal.
Fuel buying might seem simple as a consumer when filing up a minivan twice a week, where consumers can check online or via an app to find the lowest price in their area to make the most cost effective decision. If a consumer fills their tank and then the next day gas goes down a few cents, they may have lost a few bucks. At the wholesale level, where fleet purchasing pricing is set, prices can change up to 20 cents or more in a day. So if a fleet owner who decides to buy today and prices go down a tomorrow, they may lose a few thousand dollars on the decision.
As a result, the tracking of fuel pricing can become a time consuming and difficult task. Human error in small math mistakes and quickly fluctuating prices can quickly add up to lead to tens of thousands of dollars of loss a year in inaccurate fuel payments. On top of that, the ever present threat of fraud, adds concerns for overall profits.
According to Ryan Mossman, vice president and general manager of FuelQuest’s Fuel Services who oversees $2.4 billion in fuel accounts for FuelQuest, which provides on-demand fuel management, tax automation and compliance solutions. “It can be real easy to think you are buying fuel at a given price”. FuelQuest’s systems manage 22 billion gallons of fuel annually.
Tracking the pricing is much more complicated in the fleet system than in many other industries as a fuel manager may think he has purchased fuel at one price and when the fuel is delivered, the price is different. Manual systems or systems where the purchaser is different than the one paying the bills can be difficult to track, making invoicing quite difficult and many times invoices are only spot checked, making it easy for a error to slip through.
A FuelQuest survey reported that 99% of fleets claimed that they have fuel invoice discrepancies up to 25% of the time. Almost 40% of fleets believe that they are receiving inaccuracies, but only 38% plan to routinely check a greater number of invoices throughout the year. 38% also plan to implement an in-house or automated system to get costs under control. To reduce errors in the future, Mossman advises the creation of an automation system, possibly through the installing of a fuel management system or integrating fuel purchasing with an ERP system. Through systems and procedures like allotting specific roles and responsibilities for staff, create escalation procedures for invoices above certain amounts, matching invoices and payments and conducting bank reconciliation.
The industry is changing in light of the raid on Pilot J headquarters but the extra scrutiny could lead to improved understanding of the business and increased systems and procedures to prevent errors and losses for fleet owners. Mossman emphasized the importance of changes to the industry stressing that “Fleet owners need to have an understanding about what [goes into] the volatility of the fuel market,” he said, “and having the processes in place to [protect themselves]”.