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Fuel Management

Thoughts from WasteExpo: Managing Big Expenses in the Big Easy

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For those in the know, the largest event in the environmental and waste/refuse sector–WasteExpo– is going on this week in New Orleans. It is by far the largest gathering of companies in this sector each year. I was fortunate enough to present to leaders in the waste industry today about one of those primary expenses that can really eat at the bottom line, fuel for the fleet.

To the layperson, fuel is not always the most exciting thing to talk about, but when you are a fleet-based company, it is typically the largest expense after head count. So, given the pure financial impact, it commands attention and scrutiny! That being said, one of the most discussed topics this year is fuel price volatility.

The volatility that we have seen in the market since 2004 continues (with no signs of stopping). When you have a daily movement of 3 cents or more happening nearly 50% of the time, something has to be done to lessen its effects. Luckily, there are ways that companies can combat these movements, given a good plan and the technology to execute it. When you manage your fuel effectively, you can use this volatility to your advantage and not be caught on the wrong side of a 10 cent price swing – which can translate to $800 for a single load.

One of the other hot topics this year is invoicing. Given recent events in the news about fuel invoices, it’s not surprising that this audience is talking about how to ensure that the invoices they are paying are correct.

To underscore this, when we bring on a new client, we review past invoices as part of our benchmarking service, and have seen invoice inaccuracies up to 25%. When you are talking about an invoice to the tune of $20,000 to $25,000, it pays to check each one thoroughly. However, if you don’t have technology to help, this can eat up a lot of hours and the tendency will be to not scrutinize them. This is definitely not something that you want to do since even a variance of 1% of the typical fuel invoice is $200-$250, and these can quickly add up.

At the heart of this issue is the fact that fuel invoicing can be a real challenge–with the types of fuels available, contracts that pricing is tied to, the index the price is based on, and changing fuel tax rates, there are many details to manage and reconcile. We have even seen examples of customers receiving invoices from suppliers that were meant for other customers. Mistakes happen, but a $25,000 mistake can really ruin your day. To put it another way, you would hate to have all of your strategic effort around managing fuel volatility and efforts to optimize usage possibly be lost due to a single invoicing error.


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