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Four key areas for fleets to cut costs and help cash flow

Fleet Logistics UK and Ireland (FLUK) and its parent firm Fleet Logistics Group have teamed up to offer guidance on fleets on how to operate more efficiently as a result of the pandemic.

Fleet Logistics UK and Ireland says companies  have a number of options that could cut costs and help employees

The companies advise that reducing operating costs and aiding cash flow in these troubled times, along with keeping driver safe, is critical for operators, and outline four key considerations.

1. Driver training

With many drivers experiencing downtime or being furloughed, Fleet Logistics says this presents the perfect opportunity to train drivers, especially as an employers’ duty of care to its employees is still in effect.

Fleet Logistics Group is offering support to fleets through one of its health and safety partners which is providing free-of-charge training for a period of three months.

Applied Driving Techniques (ADT), a global provider of driver safety and risk management solutions, is offering three training modules on Driver Fatigue, Speed Awareness and Emotional Distractions. The offer also includes reporting, an audit trail and ADT customer service.

Oliver Stockhecke, chief sales officer of Fleet Logistics Group, said: “Social distancing is a reason to strengthen communities and focus on the safety and wellbeing of those around us.

“That is why ADT and Fleet Logistics are offering free access to three driver safety modules. We want to support staff during the current crisis or when returning to work.”

2. Re-examine fleet policy

With drivers still subject to paying Benefit-in-Kind where they have access to private use of company cars even during lockdown – and with the new 2020/21 0% BiK on zero-emission cars now in effect – Fleet Logistics UK and Ireland says now is an ideal time to review fleet policy to see where costs can be cut when we come out of lockdown.

Re-evaluating choice lists can not only help mitigate against the higher CO2 ratings that the new WLTP emissions system has brought in, but also could encourage cash drivers back into the corporate fleet, which could help to improve company control and reduce the risk posed by grey fleet vehicles.

Sue Branston, country head for Fleet Logistics UK and Ireland, commented: “The key thing is to speak with your fleet management provider and get as much advice as possible on your specific fleet and circumstances.

“Given the myriad of options available, your provider should be reviewing every area of spend – large and small – as well as looking at mileage parameters and contract extensions to reduce and manage costs.

“Ensuring that actual mileages are being used to write lease contracts, not simply relying on pooled mileages to manage excess of under mileages is crucial for accurate budgeting – particularly if you find yourself in an ongoing rolling credit basis, but never actually receive the credit,” she said.

3. Support your drivers

The impact of Covid-19 on household incomes could mean that some drivers may not want to have the responsibility for a leased car or salary sacrifice car as a monthly outgoing.

Currently, HMRC rules allow for employees to opt out of a salary sacrifice car arrangement where a lifestyle change, such as marriage, divorce or a partner becoming redundant or pregnant, significantly alters their financial circumstances.

The Government has now changed its ruling on salary sacrifice and allowed drivers who opted for a car under this type of scheme to hand it back in favour of having the cash sum previously sacrificed instead, provided their circumstances have changed as a direct result of coronavirus.

Fleet Logistics adds that fleets may need to be prepared to support their drivers in any way possible during the current crisis and be as sympathetic as possible to their position, even if it means that they may face early termination charges from their leasing provider.

4. Consider sale and leaseback

For companies that own their own vehicles, a sale and leaseback arrangement can be a good way of ensuring some much-needed cash flow for the business.

With a sale and leaseback agreement, an organisation frees the capital tied up in its owned vehicles by selling them to a leasing company and contract hiring them back for an agreed monthly rental. This releases capital and, currently, cash is king.

The business gains the advantage of fixed monthly expenditure, which can include maintenance, tyres and servicing so that full fleet costs can also budgeted for, giving true fixed cost motoring.

Lease rentals are corporation tax deductible, which helps remove the burden of any existing banking arrangements so that released cash can be used elsewhere in the business.

At the same time, the business no longer bears the financial risks associated with vehicle depreciation or the concern around residual values, which, with a recession on the horizon, may not be a desirable position for a business.

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Natalie Middleton

Natalie has worked as a fleet journalist for 16 years, previously as assistant editor on the former Company Car magazine before joining Fleet World in 2006. Prior to this, she worked on a range of B2B titles, including Insurance Age and Insurance Day. As Business Editor, Natalie ensures the group websites and newsletters are updated with the latest news.