How to use Financial Analysis

Tools for more accurately determining true asset ownership costs and replacement intervals


For recordkeeping to be the most useful, notes Vercillo, there must be consistency in continually tracking this data.

Benchmarking is the process of measuring an operation’s processes, then identifying, understanding and adapting practices from other organizations that are widely considered to be an industry standard or best practice. When correctly done, benchmarking can help cure weaknesses in a company’s operations by providing a snapshot of the performance of its operation and helping management understand where the operation is in relation to best practices so performance improvements can be made.

A key objective, say successful vehicle maintenance managers, is to figure out which functions hold the greatest opportunity for improvement. For example, areas such as preventive maintenance, service and reliability management. Once this is determined, the appropriate measures to benchmark need to be decided. Then, operations need to be found that show excellence in each of the functions targeted for improvement.

Benchmarking activity should not be limited to one’s own industry, says Vercillo. While important, most companies already have a pretty good idea how their industry performs. Going outside to other industries that perform similar processes can often provide good insight and ideas for organizational and business process improvement.

A learning path

Financial management can be a great aid to fleet and maintenance managers for a number of reasons, says Ruth Alfson, CAFM, fleet manager, fleet center of excellence, with the Serco Group, a leading provider of professional, technology and management services focused on the federal government. Along with being able to better manage capital assets, having a good grasp of financial management can also help make a more convincing case for new purchases or replacements.

Financial management is one of the eight major topics addressed as part of the NAFA Fleet Management Association’s Certified Automotive Fleet Manager (CAFM) Program. The oldest and largest fleet certification in the world, CAFM is the only program that attests to one’s expertise in the profession.

NAFA is a not-for-profit, individual membership professional society that serves the needs of members who manage fleets of all types of vehicles and mobile equipment for organizations across the globe.

The financial management program covers basic accounting principles, life cycle costs, cost analysis and much more, says Alfson, who got her CAFM certification in 1996 and has been involved with the program since, and in particular, with the finance management curriculum.

As for vehicle and maintenance life cycles and costing, the course covers how to identify the various elements involved - such as purchase price and depreciation, insurance cost, driving patterns, fuel economy, scheduled maintenance, unscheduled maintenance and repair costs, she says. The course then moves into how to actually do the calculations, based on an estimated useful term or based on mileage or age of vehicle.

Business economic analysis tools are taught for comparing the relative merit of alternatives that eliminate assumptions and guesswork. In addition, there are modules on how to link all this to strategic planning for vehicle replacement and fleet expansion.

The overall objective of the CAFM financial management course, says Alfson, is to teach how to figure overall vehicle ownership economics, how to set up an effective lifecycle costing program and how to communicate the findings to others within an organization.

SOFTWARE SYSTEMS

Fleet management and maintenance software are available that provide the tools necessary to efficiently collect the data required to figure the true cost of vehicle operation and perform life cycle analysis.

This data can then be analyzed to determine significant expense milestones over the life cycle of an individual vehicle, a group of vehicles, a vehicle type or class or an entire fleet, based on time or utilization, says Dave Walters, technical sales manager for TMW Systems. The company is a developer of enterprise management software for the surface transportation services industry, including logistics, trucking and heavy duty repair and maintenance.

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