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In the last year, rising fuel costs have become a major challenge for small businesses. Unexpectedly big bills can affect even the most stable business and when you drive for a living, you’re left with very little choice but to pay them.
A fuel card can help simplify your expenses, budgeting, and cash flow while giving you a discount on fuel. Read on to find out more about the benefits of a fuel card for your business.
A fuel card is a payment card you give to employees to pay for their fuel. It’s intended for businesses that have a number of vehicles that will regularly need to refuel.
With it, employers can keep track of how much fuel is being spent by each vehicle as well as establish spending limits.
Fuel cards work like credit cards – an employee uses the card to pay for their fuel while on a job, then the employer gets an invoice at the end of the month. The invoice includes a breakdown of how much has been spent on all of their employees’s fuel cards, which is then combined into one payment.
Each employee gets their own fuel card to use for their vehicle. The card has a pin and works like a normal credit card but it can only be used to pay for fuel at certain stations.
Where you can refuel is determined by your fuel card provider. Each provider has their own way of discounting but it’s usually applied to the final sum on the monthly invoice.
Allstar has a fuel card comparison tool that can help find a provider that suits your business.
If your business has more than one company vehicle, a fuel card can make some processes more efficient, secure, and cost-effective.
A common challenge for business owners is when tax return season comes around and they have to add up all of the money spent on fuel by their employees. Tracking down transactions and receipts throughout the year can be time consuming and difficult.
A fuel card centralises all of these payments into your monthly invoice. This makes expensing the fuel a much simpler process because all of the payments are compiled into one sum.
So even if you didn’t keep track throughout the year, you would only have a maximum of 12 payments to track down.
This process makes expenses much simpler for your employees too. Rather than them having to collect VAT recipts and track their payments and mileage, they can just use the fuel card and the card provider does the rest.
Budgeting can sometimes feel like guesswork if you’re estimating costs. Having all of your fuel costs in one place makes budgeting more straightforward.
Your invoice from the fuel card provider will give you the data on how much was spent on fuel by each vehicle. So when it comes to budgeting or doing your cash flow forecast, you can be more accurate with your monthly and yearly fuel costs.
It also helps manage your cash flow. An ad-hoc approach to fuel expenses can lead to unexpected bills that you might not have planned for. Having one scheduled payment a month makes your cash flow more predictable and stable.
Another perk of a fuel card is that you can get a discount whenever you refuel. The rates vary depending on who your provider is but they generally work on a two to three pence per litre discount.
This might not seem like much but over the course of a year, with a fleet of company vehicles, the savings add up. Particularly if you own large vans or lorries that consume more fuel than regular cars.
You also choose a payment structure with your provider that will affect the amount you pay for fuel.
You can agree a weekly rate that’ll be consistent across all of your vehicles regardless of where they refuel.
Or you can agree to the pump rate, which means you pay whatever it says at the pump. This makes payments more varied because depending on where your employee chooses to refuel, the prices will be quite different.
For example, the price to refuel at a supermarket compared to on a motorway can vary a lot.
There are lots of different fuel card providers who all do things differently. Make sure you shop around for a deal that suits your business.
When you have lots of individual payments, it can be difficult to get the bigger picture on how much your business is spending on fuel. You can use the information from your fuel card invoice to find new ways to optimise your process.
Because you get a breakdown of how much each vehicle is spending on fuel each month, you might spot places where you can be more efficient.
For example, if you see a particular vehicle is spending more on fuel than the others, you could think of ways to make their routes more cost-effective.
Using a fuel card can make paying for fuel more secure than if your employees were using their personal card or a company card.
A fuel card can only be used to pay for fuel at verified stations. This makes it impossible for it to be misused for anything other than fuel.
And if you have an idea of the average spend for each refuelling, you can set up payment limits that mean you’ll never spend over that amount.
Some providers also offer fraud protection that recognises abnormal transactions and allows you to intervene if you believe the payment is fraudulent.
Would your business benefit from using a fuel card? Let us know in the comments below.
Zach Hayward-Jones is a Copywriter at Simply Business, with six years of writing experience across entertainment, insurance, and financial services. Zach specialises in covering small business and landlord insurance. He has a particular interest in issues impacting the hospitality industry after spending a number of years working as a pastry chef.
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