Do you let your employees pay for their fuel up front and then reimburse them when they claim? This might make sense from a cash flow perspective, but you might be paying out a lot more than you would if you signed up for a fuel card scheme. Let’s look at the argument
What happens when you use a pay and reclaim (P&R) system?
You set a price per mile and your employees claim for the number of miles they have travelled, backed up by receipts from the forecourt that you can claim VAT on. Simple.
But that’s not what really happens.
Research has shown that drivers often exaggerate how many miles they have done, inflating their expenses claim. And they are less than reliable when producing receipts. A study by Concur in 2011 found that 41% of employees’ expenses were submitted without a receipt and VAT was unrecoverable.
If you add the administration costs of chasing receipts and claiming VAT to the fact that drivers are not encouraged to reduce their mileage or fuel consumption, you can see that the P&R system is open to misuse at extra cost to your business.
What happens when you use a fuel card scheme?
Your employees use their fuel card to pay for all their fuel. You get a discounted price on the pump price and can use multiple fuel providers so your employees don’t have to deviate from their route.
You are given reports by the company that shows fuel purchased in an easy format for you to claim VAT and which are HMRC compliant. You may also have mileage and efficiency reporting, allowing you to target drivers whose average MPG is high with driver training to reduce fuel consumption and carbon dioxide emissions.
You have no need to chase receipts and of course you’ll only be paying for fuel – no snacks or coffee!
Which is best for you?
The company Allstar recently conducted a study in the effectiveness of a P&R system. They found that it’s a workable system for reimbursing infrequent business drivers. However, for those who do regular mileage, or companies that operate a medium to large fleet, a business fuel card can give greater control, cost visibility and an opportunity to adapt driver behaviour as part of an overall fuel cost reduction plan.
Fuel cards are not your only option when it comes to saving money on fuel. If your costs are becoming prohibitive and you need to bring them down for the sake of your business, then you’ll benefit from my 20 minute telephone consultation. Just call or email to book and we’ll discuss your business and where you can cut fuel costs today. Call me: 0203 376 3201 Email: firstname.lastname@example.org