When Pilot Flying J corporate headquarters were raided by FBI and IRS officers in April 2013, it brought immediate and widespread attention to an issue that trucking fleets deal with on a daily basis: fuel prices. While the allegations in the Pilot Flying J scandal revolved around deliberate fraud over fuel rebates (there are still lawsuits floating around over the alleged fraud), it highlighted the impact that even slight changes in fuel pricing can have on a fleet’s bottom line.
And it got the attention of many fleets. A FuelQuest survey found that 24% of surveyed fleets had changed the way they manage and review fuel invoices as a result of the scandal.
For many fleets, tracking fuel prices for both their bulk fueling needs and trucks fueling over-the-road can be a time-consuming and tedious chore. Add in the potential for fraud as well as a number of other scenarios, such as quickly fluctuating prices and simple math errors, and some fleets could be losing tens of thousands or even hundreds of thousands of dollars a year in inaccurate fuel payments and not even know it.
For fleets who pay close attention to every tenth of a mile per gallon on their trucks, the possibility that even more money is flowing out of their pockets without them even knowing it is a very real concern. While fuel invoicing fraud is one way this can occur, it is more likely that losses are occurring due to innocent mistakes and/or the overall complexity of fuel management.
“It can be real easy to think you are buying fuel at a given price,” said Ryan Mossman, vice president and general manager of FuelQuest’s Fuel Services. “If you have a minor mistake, it could add up to hundreds of thousands of dollars.”
Mossman oversees $2.4 billion in fuel accounts for FuelQuest, which provides on-demand fuel management, tax automation and compliance solutions. The company’s software systems manage 22 billion gallons of fuel annually, said Mossman, who has been with the company for 10 years.
“It’s so easy for us to make a fuel buying decision at retail…but what really struck me when I [joined FuelQuest] is the complexity at the wholesale level,” he said. “A fleet owner who decides to buy today vs. tomorrow may lose a few thousand dollars on that decision.”
Mossman explained that on the wholesale level, which is where the pricing may be set for fleet purchasing, prices can change up to 20 cents or more in a given day. And a fleet that purchases at the wrong time could end up paying significantly more.
In some cases, Mossman added, a fuel manager may think he has purchased fuel at one price and when the fuel is delivered, the price is different. In manual systems or systems where the purchaser is different than the one paying the bills, that can be difficult to track.
“It really gets complicated and the stakes are so high because if you make a simple mistake, it could add up to thousands or hundreds of thousands of dollars,” he said. “Anecdotally, some fleets aren’t really checking [invoices] at all, and some only spot-check.”
FuelQuest recently conducted a survey on the issue of fleet fuel invoicing and the results were somewhat startling. Ninety-nine percent of fleets said they have fuel invoice discrepancies up to 25% of the time. Nearly 40% believe they are receiving fuel invoices with inaccuracies, but only 38% plan on routinely checking a greater number of invoices throughout the year. The same number said they plan to implement in-house or automated systems to help get costs under control.
“We’ve seen as high as 50% of invoices be wrong when we’ve taken over a fleet [fueling program],” Mossman said. “It may only be $10, but it’s pretty regular to see errors up to 25% of the time.
“My cautionary tale to readers is they may be small errors, but the the kinds of things that lead to the small errors can lead to big errors,” he added.
Mossman said that, in most cases, the discrepancies are unintentional or due to the complexity of the supply chain.
“I think there are multiple ways to skin the cat, but the important thing is not to ignore it,” Mossman said. He advises installing a fuel management system or integrating fuel purchasing with an ERP system. Also, define specific roles and responsibilities for staff, create escalation procedures for invoices above certain amounts such as having an executive sign off on it before paying, matching invoices and payments and conducting bank reconciliation especially if a supplier draws payment directly from a fleet bank account.
“I think you need some type of automation. The taxes are different in each state, the price is different each day. Maybe you’re unit price was only off half a penny and it passed the smell test, but it turned into several hundred dollars,” he said.
Ignoring discrepancies, Mossman said, is the wrong approach. At the same time, spot-checking can find some errors, but if the error is a one-time error, it may slip through the cracks. Recurring errors can also slip through since they consistently occur and may not trigger a suspicion.
“Fleet owners need to have an understanding about what [goes into] the volatility of the fuel market,” he said, “and having the processes in place to [protect themselves].”