June 15, 2021
4 Essential Steps to Create Your Fleet Budget
Like any type of business, your fleet management company needs to create a budget that will lead them to success and profits. If your budget is created with the future in mind, it can be a powerful tool to understand where your business is currently and what needs to be done to reach your year-end goals.
Sounds pretty easy, right? You just write down your goals, your current cash flow, how many fleet vehicles you have and you’re done.
WRONG! Creating a budget for your fleet management can be tricky to do – you want it to work for you as you are constantly adding to it, and you want the information to be as accurate as possible. You’ll want to create and use an effective fleet maintenance excel spreadsheet, or you’ll want to invest in a proper fleet truck maintenance software program.
Once you have all those items in like, you can get to the numbers part of the process. This is the hardest part, but once you complete it, adding to it and maintaining the software or excel spreadsheet will be a breeze.
Whether you’re a new fleet management company or looking to revamp your budget, there are 4 essential steps to creating a budget that will show your business is currently doing, and what you need to do going forward.
4 essential steps to create your fleet budget:
1. Set goals
When it comes to creating a budget, the first thing you need to do before you can start is set goals for your business. Whether it be weekly, monthly, quarterly, or yearly goals, you have to determine what is most important to your business right now and set goals or milestones to reach those goals. Once you have a goal, it’ll be easier to create a budget and stick to it.
When you are working on setting your goals, you want to set SMART goals – specific, measurable, achievable, realistic, and timely. For example, if you are a new fleet management company and your goal is to make $2 million in your first year, that isn’t really SMART, and you’re setting up your company and budget for failure.
2. Use historical data
Setting a budget involves looking a lot at your past performance in business, and using that data to find patterns from year to year. Knowing how much your fleet costs each year for the last 5 years is more important than you think. When creating a budget for your fleet, we always recommend looking back on the last 3-5 years and comparing each year to see if you notice growth, loss, or any patterns from year to year. This will help you determine what worked, what didn’t, what was worth the investment, and so on going forward so you can make better business decisions.
When creating your fleet budget, you’ll want to factor in both your variable costs and your fixed costs. Your variable costs are the costs that will increase or decrease based on your usage. These are things like gas, maintenance costs, part replacements, parking & tolls, cleaning, etc.
Your fixed costs are costs that are already established and don’t change (too much) from year to year. These costs don’t change no matter what your usage was. These are costs like your taxes, insurances, licenses & permits, loan or lease payments, and so on. These costs will never change so you can use those to create your budget.
3. Forecast your business
Now that you have your business goals done, and you’ve analyzed the historical data of your business, you can get to forecasting for the future. Forecasting is determining what’s going to happen in the next year of your business and adding in the lead way for anything that may come up. When it comes to forecasting, there are two main methods use to forecast your budget.
This method of forecasting uses prior periods to create your starting point for forecasting using your standards and including inflation adjustments. You essentially are determining what your baseline revenue level is, and seeing how it changes throughout the year.
This method of forecasting is much fast and a lot simpler to use. Since you have your baselines determined, you can easily repeat the process of adding in additional revenue to help forecast for the future.
The only issue we have with this method is that it doesn’t include any market changes you may experience throughout the year.
This type of method is when you essentially get to ‘start over’ with your business. You forecast quarterly and each quarter starts at 0 for everything. This method allows you to build your forecast by adding the expenses you know are going to come about in that specific quarter, and you can include market-driven inputs.
This method of forecasting is a lot more accurate than incremental because it considers the market a lot more and uses that information to project for the next quarter.
While this method is a lot more accurate, it requires a lot more detail and it takes longer to plan out and execute.
6. Track and measure
When it comes to creating your fleet budget, you’ll want to invest in the best fleet maintenance software so you can easily enter your budget information and track and measure everything that goes into making your business successful. This software will also help you to see if you are on track to reach the goals you set.
AUTOsist has a long list of features that help you track, measure, and maintain your business. Ranging from service history to custom reports, you can track and measure every aspect of your business in one place.
Here at AUTOsist, we make achieving your business goals easy! With an all-in-one online platform to help you track every aspect of your business, you can easily create your fleet budget to ensure success year after year. We offer a simple and affordable way to manage your fleet of vehicles, equipment, and everything else.