cost and expense are certainly two important factors in the financial management of any company. After all, in addition to needing to be controlled, it is also necessary to know the differences between the two to keep your fleet management running and profitable.
When the financial sector does not have the exact dimension of its expenses and relies on spreadsheets to enter the values of the difference between costs and expenses, problems appear with some frequency and destabilize the company's forecasts and results.
Read more: TCO & ROI: two acronyms that make the difference in fleet management
According to the IBGE, 48% of national companies end up closing their operations within 3 years due to poor financial management.
Thus, to avoid the decline of your profit and the closure of your business, it is necessary to have a efficient financial planning with control of costs and expenses.
To help you better understand how this works, we created this article with the main information on cost and expense in the management of light fleets, as well as how to classify them in the budget and have control over these amounts. Follow:
Classification of costs and expenses in cash flow
Control of expenses and costs in the management of light fleets
What are costs and expenses?
As similar as they are, cost and expense can be differentiated.
What is cost and what are the main types?
The cost of a company involves all expenses related to the core activity or the final product. That is, are those indispensable for their production or provision of services, therefore, without them it is impossible for your fleet of vehicles to operate.
Among the main types of cost of a company, we can mention:
- Transport
- Packaging
- Factory cleaning and maintenance supplies
- Employee Salary
- Machinery depreciation
- Equipment maintenance
- Labor
- Feedstock
Read more: Payroll deduction for damages and breakdowns
What is expense and what are the main types?
Already expense is related to all expenses involving the administration of the company, therefore, are those necessary to have revenue.
Thus, these values refer to the administrative, marketing, commercial, technological and product development sectors.
Among the main types of expenses that a company may encounter, we can mention:
- Advertising campaigns and marketing strategies
- team trips
- Pro-labore
- sales commission
- Administrative staff salaries
- Phone
- Hygiene products and snacks offered to employees
- Electricity, water and internet bills
- Office material
- building rent
- Among others
Why is it important to differentiate costs and expenses in fleet management?
A necessity of all companies is keep accounting reports up to date to avoid major problems. After all, this contributes significantly to financial health, especially in fleet management.
in these reports are all the data about the company's finances, from employees' salaries to the amount spent on performing services, which includes, for example, expenses with fuel, maintenance, among others.
Read more: Fuel economy: 8 tips to reduce fleet expenses
As much as spreadsheets are not so reliable for financial management due to their ease of suffering human errors, when companies list these values in them or in financial management systems and create an overview of how the organization's operations are going, it is possible outline strategies to increase the company's profitability and verify areas in which expenses can be reduced.
That is, it is It is very important to know how to differentiate between cost and expense in fleet management in order to have better management of your general expenses..
An example is that, with efficient cash flow management, it is possible to make important decisions for the company's growth, such as changing the value of goods or services, cutting excessive or unnecessary expenses.
That, because cost and expense have different weights in a company's accounts, which go beyond being fixed or variable. Therefore, when there is an understanding of how much each one reflects in the budget, financial management is more fluid and conscious.
Classification of costs and expenses in cash flow
After knowing the differences between costs and expenses, it's time to explore how these two expenses will be classified in the cash flow.
As expenses, for example, can be listed in types: regular and extraordinary.
- Regular expenses: are predictable, that is, the company already knows that it will need to pay them, such as administrative salaries, taxes and rent.
- Extraordinary expenses: happen without any predictability, they are unexpected. As an example, we can mention fines and corrective maintenance.
Read more: Sinistro: understand how it impacts your fleet management
However, there are still two very important classifications that involve both expenses and costs, fixed and variable calls. Check it out:
Control of expenses and costs in the management of light fleets
these expenses do not depend on the volume of goods produced or sold and the number of hours worked. Furthermore, they are expected every month.
That way, regardless of whether or not the company had a good billing in the month, it must bear these costs, such as wages, rent, among others.
Control of expenses and costs in the management of light fleets
On the contrary, variable expenses fluctuate according to the level of production, sales volume, amount of work in a period or team performance.
Some of the main examples are the bill for water, electricity, raw materials, overtime, among others.
However, it is important to remember that for service providers, the only distinction between costs and expenses is that the expenses do not involve the production of a commodity and therefore there will be no purchase of raw materials and other elements.
Therefore, it is up to fleet manager list the expenses necessary to carry out the services of the fleet itself. From the purchase of materials and equipment, such as wrenches and screwdrivers, to the values for moving the fleet, such as gasoline, parking, tolls, among others.
Control of expenses and costs in the management of light fleets
To get the long awaited financial control of expenses and costs of light fleet management, it is essential to have solutions that optimize their processes and make life easier for managers and drivers, automating operational actions and adding key management indicators.
With Golfleet Videotelemetry, for example, it is possible reduce costs with fines by reducing unsafe driving behavior, reduce fuel consumption through the fuel and vehicle management module.
Read more: How does Velocity per Lane reduce risky fleet behaviors?
We also pack any preventive maintenance module helps to reduce the number of corrective maintenance, which cause greater expenses than preventive ones, for example.
Finally, the fleet manager also has customized reports that allow a deeper analysis for the creation of strategies that help in the control of expenses and costs.
Understand more about how Golfleet Videotelemetry will revolutionize your business:
