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How B.C. Trucking Companies Should Manage the High Cost of Fuel

Accutrac 03-Nov-2015 0 Comments Permalink

British Columbia ranks as the third largest province in Canada for number of registered trucking companies. Its unique geographical characteristics creates a distinct set of market conditions that separate the region’s trucking companies from the rest of the country’s carriers. Proximity to Canada’s only Pacific sea port, treacherous mountain terrain and one of the nation’s highest insurance rates are a few of the regional features that help to separate this sector from the rest of the nation’s transportation industry.

Taxation is the Main Driver Behind B.C.’s High Cost of Fuel

But among all the differences, the cost of fuel is the most significant factor. British Columbia consistently suffers from the highest costs of fuel in the country. The gap in prices between this region and neighboring jurisdictions is due mainly to the multiple levels of taxation imposed on each liter of diesel. For example: carriers that fill up in BC’s Lower Mainland pay dedicated motor fuel tax to two different authorities, plus the federal excise tax, the provincial motor fuel general revenue tax, a carbon tax and HST tacked on top of all that. All this taxation adds up to the country’s most consistently expensive cost of fuel.

Cost Control Improves Profitability

One of the biggest challenges of operating a profitable fleet is keeping a tight control on expenses. A dollar gained in revenue is a great thing, but only a small portion reaches your earnings. Conversely, a dollar saved from costs goes directly to the bottom line. In an industry of slim margins, tight cost controls are essential to ensuring an adequate percentage of new revenues actually make it to the bottom line. When trucking companies include cost saving methods into their overall strategies they gain a financial advantage that immediately improves profitability.

The Cost of Fuel is by Far the Largest Expense

When controlling costs you need to consider impact and control. In other words, which expenses have the biggest impact on your bottom line and how much control you have on them. If an expense item scores high in both categories, you want to focus on it in your cost control plans. All trucking companies share common daily expenses that eat away at their bottom line. The cost of fuel is by far the largest expense representing well over a third of operating costs per mile. Any savings to this expense will have a significant impact on your profitability.

An Alternate Strategy to Protect your Company’s Profitability

At one time, the preferred strategy for many B.C. trucking companies to control fuel costs was to drive across the border and take advantage of lower US fuel prices. However, with the changing economies, this is no longer a valid course of action. The strengthening US economy coupled with the weakening Canadian dollar has negated the savings advantage once enjoyed by all. Now an alternate strategy must be employed to gain the substantial savings needed to protect your company’s profitability.

A fuel discount program that provides significant savings off the pump price will naturally improve your company’s bottom line. In the past, this cost saving strategy was available only to larger fleets that had the purchasing power to negotiate a preferred rate with their fuel supplier. This is no longer the case as a new generation of financial suppliers to the trucking industry has emerged offering innovative cash flow solutions and cost saving services to all trucking companies, large or small.

The Purchasing Volume and Frequency to Negotiate Aggressive Discounts

Invoice factoring companies that specialize in the trucking industry are a prime example of such services. By combining the collective purchasing strength of their entire customer base, an industry experienced and reputable factoring company will have the purchasing volume and frequency to negotiate aggressive discounts with fuel suppliers. These discounts are then passed onto the factoring company’s trucking clients. Now, whether you have one truck or a fleet of 300, your trucking company has the ability to pump diesel at lower than posted cash price to secure significant savings. This has considerable impact on the province’s carriers as 90% operate 5 trucks or fewer.

Track, Monitor and Control Costs as They Occur

It is also a proven fact that expenses are better controlled when you track and analyze them. In addition to providing a secure and simple way for drivers to pay for fuel, fuel discount cards provide detailed information about spending activities. This access to detailed reports allows management to track, monitor and control costs as they occur, at fuel tax reporting time and at year end. Improving efficiency both on the road and at the management level is a positive step towards increased profitability and sustainability.

Focus on Efficiency and Controlling Costs

Profitable carriers focus on running an efficient operation and controlling costs. Whether you operate a small trucking company in Burnaby, a mid-size fleet out of Calgary, or specialize in flat bed service from Toronto, your overall strategy needs to be the same; control costs to minimize expenses, operate your equipment to maximize utilization and provide reliable service your customers can depend on.

Success is the sum of planning and controlled efforts repeated day in and day out.

For more information about Fuel Discount Cards and the benefits of invoice factoring, contact Accutrac Capital online or call: 866 531-2615.


 

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