When someone thinks about cost management, usually the idea that comes to mind is that this is a practice for companies that are in a situation of financial instability, having problems closing the month's accounts, and not for companies in full financial health. This is an error.
It is precisely a well-done cost management that prevents a business from going into the red. And more than that: it helps to optimize the use of resources, making activities more profitable.
Managers of companies that deal directly with fleets of vehicles, whether owned or leased, know very well how expensive cars, essential tools for the operation of the business, can be. Maintenance, fuel, among many other expenses make fleet consumption always on the radar of those responsible for its management.
This is a wise attitude, but it is only the tip of the iceberg representing cost management. For this reason, we have dedicated this article entirely to this subject, in order to help you to have greater control over the fleet and its consumption. Follow:
What is cost management
How important is cost management?
How to implement cost management in your company's routine
Management tools that help with your fleet costs
What is cost management
To function properly, a business inevitably incurs costs. They range from basic utility bills to investments geared toward growing the business, such as buying more vehicles. The fact is that the cost exists from the moment the company is created and it is not possible to escape it.
The point is that profitable companies know how to deal with their costs in order to minimize them or even maintain them, but correctly investing the resources so that there is a return on this application. Otherwise, it would be wasted money.
That's what cost management is all about: managing an organization's resources so that they are better used and even reduced, increasing profitability without negatively affecting the quality of service offered by the company.
Read also Taxes on fleet management: how much do you know about them?
How important is cost management?
When you make a budget with several companies, in addition to quality, the price of the service has a lot of weight for the customer when he decides to choose which one he will close with.
That is, one of the most important points of investing in cost management is related to increased competitiveness, since the transfer of expenses to the price of the service tends to be lower with a more economical administration.
With a more affordable price, the company becomes more competitive in the market and has the possibility of attracting new customers, in addition to keeping the ones it already had in its portfolio, increasing loyalty.
In addition, cost management is responsible for providing the manager with a series of data and indicators that are absolutely crucial for more conscious and strategic decision-making, making it possible to put medium and long-term growth planning actions into practice.
This impact within the company shows how cost management permeates all the manager's work. Each action and decision also needs to be analyzed from the perspective of expenses to ensure satisfactory and advantageous results.
Deepen your knowledge by also reading the article: All about vehicle telemetry: what it is, how it works and benefits for fleet management
How to implement cost management in your company's routine
Cost management goes through a series of steps to be carried out. Check it out below and see how it helps to reduce costs, especially with the company's fleet.
1. Make a plan
All planning starts with a goal to be achieved. Everything can start as a general objective, but it is important to define more specific objectives right away so that the manager knows exactly where he needs to go.
Within cost management, the most common goals are: to cut expenses and better invest the resources you already have.
The second step is to assess what it takes to achieve those goals. This complex task can be subdivided into steps if necessary. The point is to know if the company already has infrastructure and qualified labor for the service, or if an additional investment will be necessary to make it ready to operate, minimizing future unforeseen events.
Make a list of everything needed, noting what the company already has and what needs to be provided. It is important to be realistic and rigorous with this work, avoiding the path that seems easier based on the thought: “it's not ideal, but we'll give it a 'little way' and make do with what we have”.
This type of reasoning can be very harmful, even having the potential to cause harm in the future. At this stage the values are not yet in play.
All these resources and inputs foreseen in the planning must be applied in a period of time. This can vary from company to company. Some prefer to do this type of planning for a month. Others prefer two months, three and even six months.
For managers who are implementing this type of practice now, a month is recommended, as the volume of information is smaller, that is, it is easier to work with. As experience is gained, the period can be adjusted longer if necessary.
2. Do a cost simulation
It's time to think about money. With the list of operational demands that was created in the previous step, estimate the maximum costs that it is possible to pay at each point that was noted. This is very important to direct budgets, preventing management from wasting time with what is beyond the company's possibilities.
For example: when you need to purchase a new vehicle for your fleet, you need to carefully analyze the best model considering its maintenance cost, average consumption, market depreciation, etc.
3. Assemble a budget
Bearing in mind the maximum values that the company can spend on the needs of the fleet (including renting or buying more cars if necessary), it is time to create a budget, contacting several suppliers of inputs and services.
As exemplified just now, if any value exceeds the stipulated maximum, it automatically does not enter the list of possible suppliers.
If all or most of the contacts showed a value above what was predicted, it may be necessary to go back to the previous step and redo the calculations, as the defined prices are out of market reality.
With the comparative budget ready, it is then necessary to analyze the options and close with those that presented the best cost benefit for the company. Those that were not chosen, in turn, should not be discarded, because, in case something unforeseen arises, it is always good to have a plan B.
It is worth highlighting that it is important that this analysis be extremely detailed, verifying whether comparisons are actually being made in relation to the same services, changing only the providers.
4. Track spending
Planning is just the beginning of the cost management journey. Next, it's time to field the fleet. During all operations, it is essential that the manager is attentive, monitoring everything to make sure that the planning is being followed.
It is also important to ensure that purchases, any leases and payments are being made on time. Furthermore, the fleet manager need to step in if something goes wrong during that time, especially if it's a problem with the cars in service.
5. Analyze the results
Closing the period determined in the budget, it is time to stop and analyze the results. It's time for the manager to assess whether the goals were achieved, whether the budget was respected, whether something deviated from the plan and, if so, why it happened.
Comparing the results with the plan will make all these issues clearer. Furthermore, if cost management is implemented correctly, a series of indicators, such as profitability, profitability, billing, operating margin, average ticket, among others, will help in the analysis to arrive at more accurate answers.
From them, more assertive decisions can be made about any necessary adjustments to reduce and adapt costs, in addition to proposing actions aimed at the company's growth.
Management tools that help with your fleet costs
When implementing cost management, the fleet manager will have a lot of information at hand that will help him manage this sector. However, this can be enhanced with the right tools. They will expand the manager's field of vision so that he can see more clearly where the fleet's excessive costs are, which points are satisfactory and which can be improved.
A great ally in this task is the tracking software, which makes it possible to locate each vehicle 24 hours a day. Among the main benefits of this type of system is the ability to manage the entire fleet much more easily and analyze issues related to routes, such as routes, travel outside and within business hours, travel time and other factors that have a great influence on the costs.
Telemetry is another extremely convenient technology for the manager. It brings more advanced indicators, especially with regard to driver behavior. With telemetry, it is possible to automatically control speed by lane and identify the driver in pool operations.
Besides being excellent for those who want to reduce fleet costs, especially with fuel and maintenance, telemetry is great for managers who value safety, as it makes it easier to take preventive measures against accidents and even avoid traffic fines.
Relying on this technology expands fleet manager horizons and makes cost management even more efficient.
For more than a decade Golfleet has been offering what is most advanced in fleet management technology. Get in touch with us and find out about our solutions!
