For SME Fleet Operators In The UK, Cost Control Is In The Cards

In fleet management, when it comes to cost containment, size matters.

Larger operators have leverage.  Smaller ones have less leverage when it comes to negotiating with suppliers and vendors, with the third parties and companies that help keep vehicles on the road and the wheels literally spinning.  Thus, cost control — and visibility on margins — tends to lean toward those operators who have critical mass and scale.

One recent announcement puts the spotlight on SME operators in the U.K. and efforts to level the playing field a bit.  A rebate program that debuted earlier this month, through the Allstar Plus Visa card, offers 10 percent off vehicle maintenance costs ranging from service to glass and ties at more than 1,000 garages across the nation — and in addition, links fuel and general fleet expenses into a single invoice that conforms to Her Majesty’s Revenue and Customs standards.

Allstar said when announcing the rebate that research shows 82 percent of SME fleets receive no discounts on service and repair work from suppliers.

Manual processes abound, where 65 percent of fleet managers approve such work by phone or email.

In a written exchange interview with PYMNTS, Thore Vestergaard, SVP and MD of commercial cards at Allstar’s parent company FLEETCOR, elaborated that the large percentage of fleets that do not get discounts happens because “largely it comes down to three things: Lack of information, lack of time and lack of negotiation power.

“Finding the right garages, booking a service, trying to work out whether you are being charged fair prices, etc, can be time consuming. Because of this, SMEs tend to rely on ‘friends’ rates (or as they say in the UK – ‘mates rates’) at garages they are familiar with,” he told PYMNTS.

He added that fleet budgeting for SMEs is based largely on managers’ experience and expectations of invoices that they deem an acceptable range, “although this is usually based on nothing more than a personal opinion and the assurance from the friendly garage that it is a good rate.”

In addition to finding sure footing in rates, general management of expenses proves time-consuming and costly (to the tune of billions of pounds annually), as managers must also spend time juggling administrative costs and tax reporting.

Research shows that for SMEs based in the U.K., it can take employees up to a full day every month to complete expenses, said Vestergaard.

Time, then, is of the essence and — is in short supply. Fleet managers in small businesses often juggle multiple roles at one time, said Vestergaard. As well as managing a fleet of cars, they can also be responsible for wearing hats across general management, marketing, sales or HR functions.

Finding cost savings is especially important, said Vestergaard, when vehicle operating expenses have been on the rise, especially for fuel.  Bulk diesel, he said, is slated to see prices rise by as much as 2.9 percent by the end of this year.

And yet, when it comes to managing those costs — in terms of leverage, SMEs do not have the same negotiating power as larger companies or the right scale to get a wider supplier network engaged in serious negotiation. Generally, he said, larger firms have centralized resources that have leverage or expertise in negotiating rates.

Against this backdrop, and to streamline activities, far-flung data — across different parts of the repair and maintenance processes — can be collected onto one invoice.

The Allstar fuel card, merged with the VISA network via a single chip, ensures that “transactions are intelligently routed via Allstar if the customer purchases fuel…and routed via the VISA network for anything else, such as service and repairs or even hotels and restaurants if customers want the card to work at this type of merchant,” he explained to PYMNTS.  Card users can also open and close merchant category groups and set amounts that drivers are allowed to spend.

Turning to the rebate programs in place with the card (where the minimum is 10 percent), Vestergaard said that in managing the discount process “we built an intelligent rebate platform that automatically keeps track of participating garages and captures the transaction value when a customer pays for SMR or any goods and services at a participating garage.  It calculates the rebate due, which is then credited to the customers’ monthly invoice. This happens automatically.”

Vestergaard told PYMNTS that next steps include a wider rollout of the discount program through the end of the year, with a goal of  3,000 garages across the UK, and expansion will include merchant verticals such as hotels and restaurants.