Managing your logistics business is a complex, time-consuming and costly process. Founders of logistics businesses need to always be aware of what is costing money and how much it costs. Most importantly, they need to know how much they spend on fuel. This is why founders need business fuel card management.
South Africa’s national energy demand sits at roughly 25 billion litres of fuel per year. The transport and logistics sector dominates this usage, accounting for nearly two-thirds (66,8%) of all freight energy use. Because the industry is heavily reliant on road freight, it consumes billions of litres of diesel annually.
For individual operators in the South African logistics sector, fuel is the largest variable expense, making up anywhere from 35% to 55% of total operating costs. This heavy reliance exposes fleets to significant price shocks, with volatile global oil prices and currency fluctuations.
In this article, we look at what business fuel cards are, how they work and how to manage them properly. We outline the options available to small to medium-sized enterprises (SMEs) in the logistics sector.
What is a Business Fuel Card?
A fuel card is a financial tool that tracks fuel purchases. It’s similar to a credit card in that it allows you to buy fuel as necessary, but it does have a limit on how much can be spent over time. These fuel cards are typically used by businesses with smaller fleets or where fuel is the biggest expense (and other expenses are handled separately).
Fuel Card vs Fleet Card: The Differences
Many people confuse fuel cards with fleet cards. The truth is that they are quite different, especially in how they affect the business. Key differences include the following:
- Coverage: Fuel cards cover how much a driver spends on petrol or diesel. Fleet cards cover fuel and other expenses such as tolls and servicing, providing managers with a much clearer picture of expenses.
- Operational supervision: Fuel cards are able to track the litres of fuel and the rands spent on it. Fleet cards allow you to go beyond and track servicing and maintenance to ensure optimal uptime.
- Data reporting: Fuel cards provide minimal data, because it’s only fuel being tracked. Fleet cards provide far more detailed data and insights, which simplifies compliance and admin processes.
- Spend controls and fraud prevention: Fuel cards can flag suspicious payments but cannot recognise fuel card fraud. Fleet cards have greater capabilities and can directly link the number of litres purchased with the number of litres used, making it easier to track fraudulent activities.
- Adaptability: Fuel cards are an ideal solution for smaller fleets but can be difficult to manage as the business grows. Fleet cards are easier to manage when it comes to scalability or established, complex fleets.
How Do Fuel Cards Work?
Fuel cards are there to consolidate expenses, prevent fraud by restricting purchases, and simplify tax reporting. Here is how they work in practice:
Strict Controls and PINs
Typically, managers assign cards to specific vehicles or drivers, often requiring a unique PIN to authorise transactions at the pump. Limits can be set to control daily spending, allowed locations, and product types.
Consolidated Billing and Reporting
Instead of collecting dozens of paper receipts from drivers, businesses receive a single, detailed invoice from the fuel card provider. This tracks exactly which driver purchased fuel, the mileage at the time, and the cost per litre.
Payment Structures
Fuel card payment structures generally fall into two categories:
- Credit/garage cards: Similar to standard credit cards, where the business makes purchases on credit and pays off the balance at the end of the month.
- Prepaid cards: Require the business to load funds into a fleet account beforehand, acting much like a debit card.
Managing Your Fuel Card
Managing your fuel cards will require establishing strict spending limits, assigning cards to specific drivers or vehicles, and using fleet management software to monitor transactions and track fuel consumption.
Follow these tips to successfully manage your business fuel cards:
Tip 1: Set Spending Controls
You must restrict cards to specific limits, such as maximum Rand/litre amount per transaction, the number of transactions per day, and approved fuel types.
Tip 2: Assign Cards to Individual Drivers
Give each of your drivers or vehicles their own dedicated card. This will make it easier to track individual fuel efficiency and immediately pinpoint who made a purchase.
Tip 3: Monitor Transactions in Real-time
It’s critical that you leverage technology such as digital dashboards to track when and where fuel cards are being used. Match transactions to vehicle GPS data to detect unauthorised spending or potential fuel fraud.
Tip 4: Link Cards to Fleet Management Systems
Integrating your fuel cards with a comprehensive fleet management system will enable you to automatically log costs, identify fuel-wasting driving events, and process tax-compliant invoices in one place.
Fuel Card Options for SMEs
For SMEs looking for fuel cards, major banks and oil companies offer specialised products designed for small and growing businesses, allowing you to easily track purchases and separate vehicle costs from general overheads.
Top fuel card options include:
- FNB Petro Card: The FNB Petro Card costs R74 per month plus a R6.25 transaction fee. It includes AA mechanical breakdown and emergency roadside assistance, flat tyre changes, and towing services.
- Nedbank Business Garage Card: Nedbank’s offering is priced at an annual fee of R202, it links to your existing business cheque or credit facility and is accepted at all fuel stations to cover petrol, maintenance, and tollgates.
- Shell Card: Shell offers a single payment solution for fuel, lubricants, and road tolls. You can track your fleet’s fuel usage online through the Shell Fleet Hub to reduce admin time.
- Standard Bank Garage Card: Standard Bank has a fuel card offering that provides personalised cards for regular drivers, and links to your corporate card account for detailed online transaction and reconciliation reports.
- bp FleetMove: bp, in partnership with Absa, has a smart card designed for small vehicle fleets, offering rewards at over 500 bp stations and covering tolls and top-up oil.
Fuel card management is crucial for SMEs because it provides a centralised view of transactions, mitigates the risk of fraud, and eliminates the administrative burden of processing paper receipts. It empowers small businesses to optimise fuel consumption and protect their bottom line amidst volatile global fuel prices.
Managing your logistics business is a complex, time-consuming and costly process. Founders of logistics businesses need to always be aware of what is costing money… Read More
