As the nation’s predicted recession approaches, the best advice business car managers can follow is to not sit on their hands but take action – immediately

As the global economy moves from the current ‘credit crunch’ to a more long-term slowdown, business car managers are going to find themselves under increasing pressure to cut costs.

There will be two main pressure points: reducing cashflow (the day-to-day running expenses) and bringing down capital investment (the money tied up in cars).

Of course, these two key elements should be well under control already. After all, what we are talking about here is merely pro-active fleet management and industry best practice.

But, in the present circumstances, it is important that best practice is not only being done, but also is seen to be being done. I am suggesting you put some review processes in place now, before your board directors start making the decisions for you.

“The important thing is that most businesses can significantly contain or reduce fleet costs by quite simple actions – and that must increase the chances of the core business surviving intact,” says Stewart Whyte, managing director of Fleet Audits.

What we are looking for here is a combination of quick wins and longer term capital cost reduction. Whyte suggests the three areas to focus on are fuel budget, allocation policies and funding, especially in view of the changes to capital allowances scheduled for April next year.

The fuel budget is the quickest win. Quite simply, if you are not containing that, then you’re not doing your job properly. I know there are arguments for and against fuel cards but, it seems to me, they are a no-brainer.

At the very least, ensure you have some kind of fuel use monitoring in place and a policy that allows you to enforce it. Figures I have seen from GE Capital Solutions suggest active fuel management can save around 15% of whole-life running costs.

Rather more tricky is allocation policy, not least because business cars remain such a powerful motivator and retention tool for your key staff. In such uncertain times, wholesale change is probably not a good idea and could incur more cost than it saves.

Sadly, a downturn is certain to result in job losses. So you need to have a clear strategy in place for recovery of business cars (staff who face redundancy have a habit of hanging onto their fleet car) and their rapid reallocation or disposal. There is no better way of burning through cash than having a vehicle sitting in a compound depreciating in value – so get rid of it, quick, and be realistic about its value, which will have fallen considerably.

In the longer term, it is important to remain flexible over funding. Moving to a four-year replacement cycle could bring about significant savings, but short-term contract extensions or rental offer more options. In tough times, these are important business tools that you need to understand and use, if appropriate.

Above all, do something, urges Whyte: “These are difficult times, but it is not the first time that the industry has had to face up to recession. Most companies will continue to trade but the current climate provides the opportunity for most business car operations to become leaner and cleaner – and thus save money.”