10 Tips To Establishing an Effective Fleet Management Budget
As a fleet manager, understanding and controlling your operating costs is essential to build a viable fleet that can be scaled as required. However, establishing an adequate fleet management budget isn’t always easy and requires a clear understanding of the organization’s current and future needs and its fleet requirements.
Below we’ll cover ten valuable tips you can follow when establishing an effective fleet management budget.
Set Annual fleet management Goals and Objectives
Establishing a budget for your fleet is important for various reasons and isn’t strictly associated with saving money. When you budget effectively, you allow for operational planning in other areas of the organization, helping the business achieve its larger goals and objectives.
By recognizing these annual goals and objectives and allowing them to drive many of the decisions you make in your day-to-day operations, you’ll ensure better cross-departmental alignment and increased profitability.
Forecast Your Yearly Expenses
To budget effectively for your fleet, you must recognize your yearly expenses. By understanding your annual costs, you’ll be in a better position to determine your financial needs in the new year and what you can do to improve your bottom line.
Audit and document your previous years’ spending and break down each spend type into categories. Tracking your spending by category will help you begin forecasting your yearly expenses and give you some insight into the total dollar amounts required to sustain your operations.
Identify Cost Savings Solutions
Fleet management solutions are a great way to get better visibility over your operations while ensuring you meet your budget. Click To Tweet
When establishing your fleet budget, one of the most challenging tasks is identifying all aspects of your daily operations that can impact the bottom line. However, by investing in fleet management solutions at the outset of your budget creation, you’ll be able to easily track and manage your budgetary requirements across your entire fleet.
Fleet management solutions like Derive VQ give you complete visibility and control over your fleet vehicles in the field. This allows you to better understand driving habits, fuel consumption, route planning and execution, and other areas of your fleet operations that can lead to increased spending.
Track Your Mileage and Fuel Consumption
When considering the budgetary requirements of operating a fleet, most fleet managers focus much of their time and attention on their overall mileage and fuel consumption. And there is a good reason for this: Fuel consumption makes up one of the most significant annual expenses of all fleets, and closely tracking can significantly impact the bottom line.
Your budgeting should consider the dynamic nature of fuel costs with how many miles your vehicles drive per year. Calculating inflation rates with each passing year is essential as these incremental increases can mean a significant bump in fuel spending from one year to the next.
Reduce Your Idling Times
Another area that can be helpful to monitor when managing budgets for your fleet is your vehicle idling times. Vehicles that idle for considerable amounts of time can lead to many long-term budgetary challenges and can ultimately impact the lifespan of a vehicle.
Finding a way to monitor and improve vehicle idle times is another great way to improve the lifespan of a vehicle while also minimizing spend on unexpected vehicle repair. One way to achieve this is by utilizing a solution like Derive VQ Efficiency that gives fleet managers the ability to control and optimize their vehicle idle times through custom vehicle calibrations and fleet telematics.
Lower Annual Maintenance Costs
When constructing your fleet budget, another area you should consider is your annual vehicle maintenance costs. While these costs may average out over time, it’s important to remember that the longer your vehicles are in circulation, the higher your annual costs can become.
One way to keep your maintenance costs more predictable and within budget is to implement a regular schedule for vehicle maintenance. Regular vehicle maintenance can help to reduce costly repairs and help to keep your vehicles on the road longer without impacting productivity levels.
Invest In Driver Safety
Driver safety is another component of fleet operations that can impact how your budgets are managed throughout the year. While driver safety is vital for protecting fleet drivers and the public, it leads to fewer accidents, ultimately leading to fewer vehicle repairs.
By implementing driver safety enforcement and compliance standards, you’ll be able to effectively manage your budgets while also encouraging best safety practices across your entire fleet.
Know Your Recurring Monthly Costs
When building your annual budget, it’s essential to know all of your monthly recurring costs. Examples of monthly recurring fleet expenses include employee salaries, fuel expenditure, vehicle insurance costs, regularly scheduled maintenance expenses, and anything else you can safely assume will impact the bottom line of your fleet operations.
Measure Budgets Throughout The Year
Establishing an annual budget for your fleet doesn’t provide any value to the organization unless it is tracked regularly throughout the year. Budgets should be monitored every month or quarter, depending on the size of the organization and your budgeting needs. By tracking your budget progress throughout the year, you’ll be able to quickly pivot your spending if you find you’re off track with your budgeting goals.
Plan For Changes
Design your budgets to be flexible. Budgets aren’t necessarily designed to be set in stone. While certain areas of your budget may need to be strictly adhered to, as an overall rule of thumb, you should be prepared to make slight adjustments or sacrifices throughout the year as new information becomes available. Planning for budget adjustments ahead of time will ensure you can remain agile throughout the year and make quick changes in direction as the needs arise.
Managing a fleet management budget requires a clear knowledge of your fleet operations and their components that impact the bottom line. By following these ten tips, you’ll be on your way to creating a fleet management budget that improves profitability and helps to ensure long-term fleet sustainability.