When it comes to picking a fuel card, the effects of billing cycles on your company’s operations are often overlooked. Naturally, the focus of fuel card research tends to be on discounts, locations, and controls, but your accounting team will thank you for finding the best solution for your company. To help you make this decision, we’ve outlined the pros and cons of the two different ways fuel card companies bill their customers.
You are likely familiar with this form of billing, as it is also used by consumer credit card companies. Every month at around the same time, you will receive a statement showing the charges for your fleet and have 22 days to pay the balance. Sounds simple enough, right?
However, just like a consumer credit card, this can lead to some major challenges down the line. Have you ever had to book a last-minute flight to deal with a family emergency, only to find that you’ve hit your credit limit? The same thing happens when dealing with fuel card monthly statements. Many fuel card users have a low credit limit that requires them to prepay part of their invoice every month just to continue using their fuel card.
Prepaying without an invoice creates more work for your company’s Accounts Payable Department, as they will have to submit an additional expense report and possibly acquire approval from a high-level manager since the true invoice amount is unknown. Additionally, due to the rush to get the fleet cards up and running again, you may have to initiate a last-minute ACH or wire payment, incurring fees from your bank. Given the possible frustrations of a monthly billing process, be sure to connect with your accounting team as you search for the right fuel card options.
Pros: If your credit limit allows for a single payment for an entire month’s fuel, then you have fewer invoices to review and payments to process.
Cons: If you hit your credit limit early, you will have to prepay without an invoice. You won’t be able to see any issues with your bill prior to paying. Also, making a payment without an invoice can complicate your internal accounting process.
Given the complications mentioned above, most companies prefer to work with statements or invoices that are tailored to their credit limits. P-Fleet believes that these weekly statements are a better solution for most situations because it allows you to stay on top of your invoices and monitor for misuse in a timely manner. Dealing with suspect purchases a month after they occurred can be difficult for the manager and driver alike, but weekly payments allow you to consistently review your transactions for issues with drivers or errors.
In addition, invoices or statements that are in line with credit limits simplify the approval and payment processes for most accounting departments. The invoice is a natural reminder to review, approve and make a payment. Accounting departments will always have an invoice when making a payment, eliminating the need for prepaid expenses and simplifying any reconciliation.
Pros: Allows you to stay on top of your invoices and monitor for misuse; avoid hitting credit limit. You always have an invoice to enter into your accounting system before generating the payment, simplifying your accounting process.
Though locations, discounts, and controls are important factors in your fuel card choice, confer with your accounting team to see which billing cycle setup is best for you. P-Fleet has found that most companies prefer statements that match their credit limits, so ensure that your fuel card provider offers this.
Topic: Fleet Fuel Cards