4 steps to properly develop a fleet budget
4 steps to properly develop a fleet budget

4 steps to properly develop a fleet budget

Fleet management cannot be improvised. As for each part of your company, your fleet of vehicles must be the subject of a rigorously constructed budget. If not done properly, you may face significant additional costs that could jeopardize your business. A well estimated budget not only allows you to foresee your expenses for the coming year, but also to quickly notice unusual data: if your monthly fuel consumption does not correspond to the budgeted one, it is possible that you are subject to theft, or to overconsumption for example

We will therefore study the 4 key steps in building a fleet budget.

1. Define objectives and strategies

This first point is certainly the most important: if you do not define your objectives properly, you run the risk of missing out on problems and not getting the most out of your fleet. So remember this: in general, the objectives of each of your departments within the company must be aligned with the company’s overall objectives. Indeed, your budget will be a more relevant indicator if it supports this global objective.

For example, you can choose to decrease your fuel consumption by X%, increase the utilization rate of your vehicles by X%, etc… and define how this will help your company. You then need to detail the strategy(ies) you plan to implement to achieve your goals. It’s not enough to know “what” to do, you need to know “how” to get there. This may involve, for example, new consumption control processes, or the implementation of management software.

2. Determine cost assumptions

The second step is to determine what costs might occur in this new year of fleet management. 

There are two types of costs: fixed costs and variable costs. Fixed costs do not vary according to the use of the vehicle, while variable costs are directly related to its activity.

Fixed costs include taxes, insurance, loans taken out to buy the fleet, leasing costs if you don’t own the vehicle, and depreciation.

The variable costs of a fleet budget include maintenance, fuel, change of parts, parking fees… all the elements that vary according to the use of the vehicle.

To determine which ones are most relevant to your situation, I invite you to have a look at your expense data history for previous years: you should find all the items related to your fleet for which you had to pay fees. This will give you a pretty good idea of what your costs will be. You can also use your TCO, which we teach you to calculate in this article (link to the relevant article). 

You will notice that the most common variable costs are maintenance and fuel. Fuel is the most difficult cost to predict, as it depends on many factors, ranging from the distance driven to the driving behavior of the drivers. However, the uncertainty around fuel consumption can be mitigated with fleet management software. By controlling the causes of over consumption (and therefore removing the uncertainties from the equation), you can get a more accurate estimate of consumption per vehicle.

Picture of a budget and what people should think about when making one. General picture, not dedicated to fleet management

3. Create your cost model for your fleet budget

Now that you have defined the costs of your fleet, you need to estimate them for the coming year, adapting them to your objectives.

It is interesting to base these estimates on the previous year(s), adding in the balance growth, inflation… so that your new figures are representative of your activity. It can be easier and often more relevant to base your objectives on previous performances (“Reduce fuel consumption by 10% compared to the year 2020” for example).

You can also start from scratches each year. It is more complex, but it allows you to adapt the budget to the current market conditions and therefore to be more accurate and representative.

4. Monitor the proper implementation of the fleet budget 

Once everything is in place, all you have to do is make sure that your fleet’s costs are within the budget you have planned. Of course, depending on market developments, your budget may also change, but make sure that your forecasts match as much as possible what is actually happening. If this is not the case, don’t hesitate to go back to the beginning of these 4 steps, you may have missed an element about your fleet.

Of course, to facilitate this follow-up, you can use a fleet management software. And since we talk better about what we know, here are some advantages of using Fleeti!

Fleeti is fleet management made easy. As specialists in fuel issues in Africa, we have developed an expertise that allows companies to save up to 20% on their fuel budget. Your variable costs remain under control: we set up a preventive maintenance system, and act on all factors of over consumption. We analyze your fleet, for you: access different reports adapted to your needs, to know at any time the state of your fleet and the ways to improve it. Moreover, thanks to our history, you will be able to study past costs in a few clicks, instead of going through tons of Excel.

If you think you need our management software, I invite you to fill out the form below. Feel free to consult other articles on our blog, to learn more about fleet management.

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