Unauthorised discounts cost fleet companies millions yearly

Fleet operators are losing substantial revenue due to unauthorised discounts and poor pricing practices, according to data science firm FOYI. These issues hinder the competitiveness of New Zealand's fleet management sector, the firm states.

FOYI's analysis reveals that fleet organisations frequently fail to accurately invoice for all costs and provide discounts beyond authorised limits, leading to significant revenue leakage.

"Revenue leakage from poor pricing is rampant for fleet operators but often goes unnoticed," said Sidharth Macherla, Principal Data Scientist at FOYI.

"Our findings show fleet operators are quite literally gifting away profits through sloppy pricing processes."

To identify these revenue leaks, FOYI examines fleet organisations' pricing data, historic invoices, and discount policies. The firm's data-driven approach helps calculate both the total amount of leaked revenue and the resulting lost profit opportunity. Macherla pointed out that between 3-5% of all invoices contain pricing inaccuracies ranging from 5-12%, representing a considerable impact on the bottom line for fleet operators of all sizes.

"From companies we've analysed, thousands of dollars are falling through the cracks annually from revenue leakage," Macherla added.

"Plugging these pricing leaks is the fastest way for operators to boost profits without increasing sales."

Several factors contribute to this revenue leakage, including software that allows unauthorised editing of pricing documents, misconceptions among staff about profitability, and error-prone manual auditing processes.

An additional concern raised by Ernst & Young is that 1 to 5% of EBITA can slip away unnoticed due to inadequate contract management and payment follow-up processes.

To tackle this problem, FOYI recommends a strategic approach that includes quantifying the extent of leakage, pinpointing high-impact areas, engaging relevant stakeholders, and implementing targeted corrective measures.

FOYI's technological solutions enable fleet owners to accurately identify and address the sources of revenue leakage, allowing for immediate corrective action.

"Revenue leakage is a complex issue that can have a substantial impact on a company's bottom line," Macherla said.

"Our experience working with fleet owners has revealed this as a common challenge, but also suggests potential solutions to mitigate revenue leakage."

FOYI provides tools and capabilities designed to help fleet owners identify business problems, detect revenue anomalies, and implement steps to maximise profitability. The firm customises its solutions to match each organisation's specific pricing structures, policies, and data systems. This ongoing monitoring allows fleet companies to continually identify and rectify leakage issues.

The insights provided by FOYI underscore the importance of data-driven strategies in addressing revenue leakage and optimising operational efficiency within the fleet management industry.

By leveraging data analytics and behavioural insights, fleet owners can identify and mitigate revenue discrepancies, ultimately driving sustainable growth and maximising profitability.