3 Tips To Keep Fleet Management Costs Down As A Small Business

As a current small business owner or someone planning to launch a business, perfecting the art of keeping business costs low is an important part of ensuring long term business profitability and survival.

Poor cash flow management accounts for 82 percent of small business failures, according to a recent U.S Bank study, and keeping your expenses under control is a significant factor in effectively managing your business cash flow. Along with standard fixed expenses such as rent and utilities, another one of the most significant expenses faced by a small business tends to be the cost of its fleet, both in purchasing and maintenance. As a result, if small business owners are going to keep their business costs low, minimizing their fleet management costs would be a great place to start.

Research Insurance Classification On Vehicles Before Buying

Before heading out to choose a vehicle model for your fleet, there are a few things you must first consider, including the model’s match to your delivery scheme and its ongoing costs to maintain. You will want to ensure you can match your current budgetary abilities to the cost of maintaining the fleet, or you risk repossession or running your business into debt.

One of those ongoing costs? Insurance coverage. Insurance categories are calculated differently according to the type of vehicles, their emissions, age and other preset markers. In addition to weighing the features of vehicle models, like their price or fuel economy, you can also look around and get sample insurance quotes of the different models before heading out to sign a purchase contract.

Capitalize On The Cheapest Ownership Route: Purchasing, Contract Or Leasing

If you want to minimize the cost of your fleet as a small business, its best to start at the very beginning: purchasing costs. If you opt to purchase your fleet, you gain the benefit of full control. However, it also means you are in control of depreciation and any scrap value vehicles may have. Outright purchase costs are also higher than alternatives such as a contract hire or lease, and therefore can stretch your business budget or require you to rely on business financings such as credit cards and loans with high-interest rates.

If you opt for a business contract hire, you can make monthly or quarterly payments but have to return the vehicle at the end of the pre-agreed period. On the plus side, it frees your resources up to upgrade your fleet to a more modern or efficient model. Another option would be the hire purchase route, which gives you ownership of the vehicle at the end of the period, and payments may also cover costs of routine maintenance or vehicle damage.

Identify The Most Efficient Routes Early On

Based on the latest data issued by the American Transportation Institute (ATRI), the average trucking cost per mile in the US averages $1.69. For larger companies with a more expansive transportation budget, this cost can seem minuscule. However, for small businesses (and smaller operating budgets), the cost is magnified. Therefore small businesses must identify the most efficient driving routes early on, to avoid wasted fuel and employee time (which has to be compensated for).

If you are an established business, then chances are you will be able to utilize past driving, traffic and delivery data to establish patterns and a route with maximum efficiency. If you are a new business, consider investing in routing or scheduling software such as FreightPath or Samsara. Businesses that make the switch from manual to automated scheduling can not only reduce mileage by 10-30 percent but also reduce the time. Less time spent on the road equates to higher productivity for your drivers and possibly lower labor costs.

Above all, fleet management requires careful consideration and research just like any other important business decision. However, with a well-managed fleet, your business can experience optimal efficiency and productivity in capital costs, overhead costs, and employee costs.

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