In the age of the Internet of Things (IoT), fleet has an opportunity to gain unprecedented visibility into the operations and actions of drivers and their vehicles, thanks to mobile devices and connected vehicles. But fleet managers are missing a critical component of connectivity, and it’s limiting their ability to deliver cost savings and strategic insights for their organizations.
Researchers at Fleet Advantage published the results of a survey earlier this month, highlighting the disconnect between fleet managers and finance departments under the same corporate roof.
More than a third of fleet management professionals surveyed said they lack the ability to adequately communicate with members of their organizations’ finance departments, preventing them from delivering metrics on fleet spend. With most fleet professionals acknowledging that cost reduction is a top concern for their firms’ finance professionals, a lack of communication on how much fleet departments are spending and saving reveals a fracture in their ability to deliver on those priorities.
The report pointed to a lack of understanding by finance professionals with regards to how fleet may support their cost reduction and cash flow goals. For instance, Fleet Advantage found that finance professionals are unclear about lease-versus-purchase decisions or fleet acquisition strategies, and their impact on the company’s bottom lines. Only a quarter of survey respondents said their finance departments are concerned about these fleet-related spend metrics.
“It is evident that both the operations and finance departments are focused on different priorities in terms of fleet management and costs, and this poses a challenge to collectively achieve a singular organizational goal,” said Fleet Advantage President and Chief Financial Officer Brian Holland in a statement.
Nearly 10 percent of fleet professionals said they can’t even get a meeting with finance professionals, imposing a massive barrier to aligning their goals and priorities. Nearly one-fifth said the finance team does not understand how new trucks can reduce driver turnover, while about one-tenth said a top barrier is their finance team failing to explain their company’s overall goals. More than a third said the finance department does not understand the financial benefit of investing in new trucks, while even more — 37.5 percent — said corporate fleet operations are unable to understand financial metrics, goals and performance. More than 15 percent said their finance teams consider fleet to be an unnecessary cost.
This lack of communication has created significant barriers for fleet managers when they need capital for investments, such as new trucks, for example. Surveyed fleet professionals said the top metric they present when seeking that capital from their finance team is maintenance and repair (M&R) costs. More than half say they present data on truck utilization, fuel economy and truck replacement costs.
M&R costs are also the most commonly used metric for fleet professionals when determining return on investment (ROI).
The communication disconnect could be making fleet managers’ jobs more difficult. Different financial priorities could make it harder for fleet to convince finance of the need for new investments. And though finance teams are most concerned with cash flow management and cost reduction, survey respondents said “providing excellent customer service” is the top reason they give when convincing finance teams of the need for a private fleet. Financial reasons, including controlled costs, were cited by just half of survey respondents.
“With M&R representing the largest, most volatile of operational costs in a truck fleet, a stronger focus by finance on [total cost of ownership (TCO)] metrics would help improve cost reduction and cash flow for the bottom line significantly,” researchers concluded. “Unfortunately, approximately 18.8 percent of finance professionals never inquire about these metrics.”
It’s clear that fleet and finance departments are not speaking the same language, and this communication disconnect could be preventing organizations from saving money and reaching financial goals.
Last year, research from fuelGenie found that many companies, particularly smaller firms (SMBs), are unaware of fleet technologies that support cost savings and improved ROI. Nearly a third of SMBs surveyed continue to use traditional expense reimbursement processes when drivers spend company money. However, the challenge here is that, to convince finance teams to invest in money-saving fleet technologies, fleet and finance departments must land on the same page about financial performance goals.