It’s hard to call any line of work easy. Selling ice cream on a hot day even comes with inevitable wrist and elbow pain. No one is about to say that working in the retail industry is easy. And with the rise of online purchasing, competition has never been higher. If there’s an edge to be had over another company, you take it. Which is why it’s so surprising that so many retail companies still have company car programs. Why is that so surprising? For an industry so cut throat, many companies are ignoring a big opportunity to save big. How can a retail company create savings through their vehicle program?
A lot of money goes into travel and expense. Depending on your vehicle program, a lot of it doesn’t have to. Two vehicle programs that can be particularly costly are the company car program, also called a fleet program, and the cents-per-mile (CPM) program. Here’s a general breakdown of how they can cost you more than they should.
If You Have a Fleet Program, Get Rid of It
You work in the selling of things, not the upkeep of vehicles. You’re not in the car management business. It can be hard to part with the company car program for a few reasons. The biggest is probably the perceived benefit from your employees. Well, let’s look at all the downsides.
Fleet vehicles are expensive. First, there’s the upfront costs. If you purchase them, that’s a significant chunk of the budget right there. If you leased them, it’s still a sizeable piece. But hey, you have vehicles for your mobile workforce. Ready, set, go, right?
Well, once they go, there will be problems. Regardless of whether you own or lease, repair of the vehicle is on your company. It might be a flat tire. It might be a fender bender. Multiply those costs by the number of vehicles in your fleet, and again by the number of years you’ll have those vehicles. That sizeable chunk of the budget? It just grew a little bigger.
Then there’s a big accident. Given the number of automotive accidents reached record highs this year, I wouldn’t count on always having perfect drivers in your mobile workforce. If one of your mobile workers is found at fault, the costs are coming right out of the company pocket. It will be expensive. Accidents cost companies a total of $56 billion in 2017. It depends on how bad the accident is, but it will make those previous repair costs look like pocket change.
Let’s say you stick with it, despite the other listed reasons. You’re going to have your company car program, regardless of liability. But your cars need to be replaced. That’s alright, you can sell them back to the company you bought/leased them from, right? Absolutely. At a significant drop in value. Depreciation is on the rise. And, wouldn’t you believe it, so is the price of new vehicles. A big line item on your travel and expense budget just ballooned into a financial nightmare.
Your Mileage Reimbursement Program Could Be Draining You
Another program that can potentially cause a collective company headache is the cents-per-mile (CPM) program. With a CPM program, companies reimburse mobile workers for driving their personal vehicle by a per-mile rate. As long as the company reimburses mobile workers at or below the IRS Safe Harbor Rate (57.5 cents per mile) and their mobile workers log the appropriate mileage information, they maintain IRS compliance. This leaves room for two major issues.
Many companies don’t realize that the IRS Safe Harbor Rate is not a suggested reimbursement. Many companies over reimburse their mobile workers by offering 58 cents per mile. Other companies may offer a cents-per-mile rate too far below the IRS Safe Harbor Rate for their workers and under-reimburse their mobile workers. This is especially true of companies that offer the same reimbursement to all their mobile workers, even though the price of gas varies by location. This can leave the company vulnerable to employee lawsuit.
As mentioned before, for an accountable vehicle program to remain IRS compliant mobile workers must keep track of their mileage and various trip details. Many companies use manual mileage tracking. Logging mileage manually burdens your mobile workers with unwanted administrative work. Additionally, mileage logs aren’t always compliant. Hastily scribbled notes and generously estimated mileage can lead to further problems for your company.
Other options offer features that can help you increase mobile workforce insight and productivity. Which leads us to savings point number two.
This is not easy. If you don’t have the right program –*cough*fleet*cough*– you’re going to have a hard time figuring out what your mobile workforce is up to.
Vehicle programs like the Fixed and Variable Rate (FAVR) reimbursement program reimburse employees for the fixed costs (registration, insurance, taxes) and variable costs (fuel, maintenance) of driving their personal vehicles for business. This vehicle program can also be supported with automated mileage tracking through a mobile device.
Like the CPM program, if you want to have an IRS compliant program, you need mileage logs. Instead of manually capturing mileage, automated mileage tracking easily captures mileage and simplifies the submission process. Compliant mileage logs guaranteed.
An additional benefit to mileage tracking is travel data. If a mobile worker has consistently higher mileage, a program administrator can check their mileage records to compare the time they spend visiting stores versus time spent on the road. Say one sales manager is driving miles out of their way to check on a store that is much closer to another manager’s district. Program administrators can visualize these patterns and make structural changes to achieve better efficiency.
Mileage can also be compared between mobile workers to find anomalies or shining examples of efficient mobile workers. With this information at their fingertips, a retail company would be uniquely positioned to optimize their mobile workforce for peak efficiency.
It’s easy to overlook the potential for increased efficiency and decreased expenses when you don’t know your vehicle program options. In a busy business like retail, overlooking optimal options is no longer viable. If you want to learn more about how your company can improve its vehicle program, check out our whitepaper, The Two-Pronged Approach: How Retail Organizations Can Reduce Risk and Create Savings!