Cost and expense are, without a doubt, two important factors in the financial management of any company. After all, in addition to needing to be controlled, it's also necessary to know the differences between the two to keep your fleet management functioning 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 all the difference in fleet management
According to IBGE ( Brazilian Institute of Geography and Statistics ), 48% of Brazilian companies end up closing their operations within 3 years due to poor financial management.
Therefore, to avoid declining profits and the closure of your business, it is necessary to have efficient financial planning and control over costs and expenses.
To help you better understand how this works, we've prepared this article with key information about costs and expenses in light vehicle fleet management , as well as how to classify them in your budget and control these amounts. Read on:
Classification of costs and expenses in cash flow
Control of expenses and costs in the management of light fleets
What are costs and expenses?
Although they may seem similar, cost and expense can be different.
What is cost and what are the main types?
A company's costs encompass all expenses related to its core business or final product . In other words, these are the essential costs for its production or service provision; therefore, without them, its fleet of vehicles cannot 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 losses
What is expense and what are the main types?
Expenses , on the other hand , are related to all the costs involved in running the company ; therefore, they are those necessary to generate 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?
One necessity for all companies is keeping their accounting reports up-to-date to avoid major problems . After all, this contributes significantly to financial health, especially in fleet management.
These reports contain all the data about the company's finances , from employee salaries to the amount spent on providing services, which includes, for example, expenses for fuel, maintenance, and others.
Read more: Fuel economy: 8 tips to reduce fleet expenses
Although spreadsheets are not as reliable for financial management due to their susceptibility to human error, when companies list these values in spreadsheets or in financial management systems and create an overview of how the organization's operations are going, it is possible to devise strategies to increase the company's profitability and identify areas where expenses can be reduced.
In other words, it is very important to know how to differentiate between cost and expense in fleet management in order to better manage your overall 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.
This is because costs and expenses have different weights in a company's accounts , going beyond simply being fixed or variable. Therefore, when there is an understanding of how much each one impacts the budget, financial management becomes more fluid and conscious.
Classification of costs and expenses in cash flow
After understanding the differences between costs and expenses, it's time to explore how these two expenditures will be classified in the cash flow.
Expenses , for example, can be categorized into 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: Accident: understand how it impacts your fleet management
However, there are still two very important classifications that involve both expenses and costs, called fixed and variable . Take a look:
Control of expenses and costs in the management of light fleets
These expenses do not depend on the volume of goods produced or sold, nor on the number of hours worked . Furthermore, they are expected every month.
Therefore, regardless of whether or not the company had good revenue in the month, it must bear these expenses , such as salaries, rent, and others.
Control of expenses and costs in the management of light fleets
Conversely, variable costs fluctuate according to the level of production, sales volume, amount of work in a given 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 companies , the only distinction between costs and expenses is that expenses do not involve the production of a good and therefore there will be no purchase of raw materials and other elements.
Therefore, it is up to the fleet manager to list the expenses necessary for carrying out the fleet's services . This includes everything from purchasing materials and equipment, such as wrenches and screwdrivers, to the costs of fleet transportation, such as gasoline, parking, tolls, and others.
Control of expenses and costs in the management of light fleets
To achieve the much-desired financial control over expenses and costs in managing light vehicle fleets , it is essential to have solutions that optimize processes and make life easier for both managers and drivers , automating operational actions and adding key management indicators.
With Golfleet Videotelemetry , for example, it is possible to reduce expenses related to fines by reducing unsafe driving behaviors, and decrease fuel consumption through the fuel and mileage management module.
Read more: How does Speed by Lane reduce risky fleet behaviors?
Furthermore, the preventive maintenance module helps to reduce the number of corrective maintenance interventions , which cause higher expenses than preventive maintenance, for example.
Finally, the fleet manager also has access to customized reports that allow for a more in-depth analysis to create strategies that help control expenses and costs.
Understand more about how Golfleet Videotelemetry will revolutionize your business:
