8 Ways That a Mileage Reimbursement Benefits the Bottom Line

by David Olson

As 2013 begins, many businesses face continued uncertainties and new and higher taxes. This may force business owners to reduce the amount that they would otherwise use to expand their workforce or re-invest in their company. If your business is hit with an increase, how will you obtain relief? 
Companies with employees who drive for business have turned to mileage reimbursements as a cost-saving alternative to company-provided vehicles, flat car allowances or cents-per-mile programs. A carefully designed mileage reimbursement plan is proven to control both cost and risk – here’s how:
1) A mileage reimbursement program that accounts for a variable component, such as gas, can be updated based on a driver’s specific geographic location – and can be updated monthly to reflect market conditions – ensuring the company is not overpaying for gas.
2) Flat car allowances and cents-per-mile programs can inequitably reimburse drivers, often overpaying the drivers’ reasonable expense, which drains money directly from the company’s bottom line. Companies using flat allowance reimbursements typically overpay between 6-30% because of compensation related taxes.
3) Mileage reimbursement plans are highly scalable, allowing companies who have huge workforce swings to react very quickly, without negatively impacting their bottom line.
4) Costs are fairly shared by both the employer and employee. The employer only reimburses for the portion of driving expense that is business related while fleet management systems assume the costs of the vehicle 24/7.
5) Typical costs associated with fleet management programs, such as administration and capital costs, are reduced or eliminated, saving 8-16% when a mileage reimbursement plan is implemented.
6) Invested costs, such as the monthly lease cost or the purchase price of a vehicle through a company-provided vehicle program, are eliminated with mileage reimbursements. Instead, the employer reasonably reimburses the employee monthly for the portion of the vehicle that is used only for business driving.
7) With a fleet management solution, the company is exposed to insurance liability concerns 24/7, while a mileage reimbursement program limits exposure to only business related hours in the day, reducing liability exposure up to 64%.
8) Employees are free to select the vehicle of their choice that makes the most sense for their lifestyle. Since the vehicle is theirs, they can drive it whenever and wherever they like, for both personal and business use.

What do you think about mileage reimbursements? Let us know in the comments below.

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Posted 1/11/2013 2:16:35 PM | 0 comments
Tags: business vehicle program, car allowance, fleet management solution, mileage reimbursement


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