Although budgeting may not be the fleet manager’s favorite task, it is important that it is developed and adhered to in order to determine financial goals, plan for unexpected costs, find ways to save costs, and monitor spending throughout the year.
Step #1: Determine financial goals
The first step to developing a fleet budget is to determine your financial goals for the upcoming year. Ask yourself questions like: how many vehicles will you buy and sell this year? What is the total cost of operations for each of those vehicles? What will be the annual fuel costs? It is also important to leave scope in the budget for vehicle depreciation, insurance costs, taxes and licensing fees. Depending on the laws and regulations in your city, safety programs, training and certification may be needed for each of your employees. Determining your financial goals is an important first step in order to get started with your budget and become aware of the items that must be accounted for.
Step #2: Plan for unexpected costs
It is key that you plan for unexpected costs in order to avoid issues impacting your budget. One of the main unexpected costs is fuel price increase or decrease. Fuel price is uncontrollable and if there is a sudden increase, it is important that you are prepared, and your budget can handle the impact. Vehicle downtime is another unexpected cost that could come up. If a vehicle breaks down, you must be prepared to pay for parts, and labor to have it fixed. Accidents can greatly impact your budget as well. You must have the insurance to cover any damage done, costs to cover injuries, and the cost of any parts or labor needed to repair the vehicles. Including an emergency fund is a great way to protect your budget and prevent the impact from unexpected expenses.
Step #3: Analyze historical budgets
Once you take into account all the items to include in your annual plan, you need to estimate a dollar value for each item. A great way to complete this step is to analyze historical budgets and use those figures as a base for the upcoming year. It is important that you only use previous numbers as a guide and remember to consider inflation. Looking at previous numbers can also help you find trends and make financial predictions for the upcoming year. For an example, if gas prices have been steadily rising over the past 5 years, it is likely that the price will rise by a similar amount next year. As well, it is a great way to find areas where you overspent and find ways to cut costs in the upcoming year.
Step #4: Assess spending regularly
When your budget is complete, it is important that you review it regularly throughout the year. This will help you stay on track and assess the progress of your financial goals. It will also let you observe trends and allow you to adjust figures as needed. If you notice you are overspending in one category, decide whether you can cut costs from another category. Each time you review the budget, you can compare it to previous periods to see if you are on track. If not, an analysis can be made to find reasons for over or underspending and a plan can be put in place to get back on track. Remember that your budget is not a fixed document, it is flexible and can be adjusted accordingly.
Budgeting is often a unique process for each fleet manager, however if you determine your goals, plan for unexpected costs, analyze previous budgets, and review regularly, the budget will surely be a success.
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