Recent research has revealed that an alarming number of fuel invoices are inaccurate. Across the industry errors of $15 or more occur on roughly 25% of all invoices. In fact, it’s not uncommon to see error rates as high as 55%!1 In 2014, Spirit Airlines had to pay $9.3 million in back taxes resulting from inaccurate fuel invoices from its supplier. To add insult to injury, the unexpected financial hit caused the company’s stock to drop over 5 percent!2
These miscalculations are almost never the result of fuel suppliers’ deliberate or unethical behavior. But, regardless of the cause, they can result in a substantial and unfair premium for your fuel. Undetected mistakes can also result in extra operational costs, back taxes, penalties and interest when they come to light.
Several factors can lead to inaccuracies in fuel invoices. Some, such as changes to the complex network of indirect taxes, are outside your influence. But delivery diversion is one contributing factor you can control. Because fuel prices can vary by several cents from day to day and different jurisdictions have different taxes, altering the time or location of your fuel delivery can trigger invoice errors. While some diversions are unavoidable, it’s always wise to pay extra attention to invoices for altered deliveries.
What else can you do?
These three strategies can help protect your bottom line:
- Monitor excise tax rules and rates – These rules and rates change frequently, and it’s in your best interest to keep track of changes yourself instead of trusting your supplier to do so in an accurate and timely manner.
- Independently price and tax fuel purchase orders – Do the math and capture the results in every fuel PO. That way, when your supplier’s invoice arrives, you’ll be in a position to detect any discrepancies.
- Automate invoice reconciliation – The complexity of fuel pricing makes it difficult and time-consuming to monitor manually. Automation allows you to fully price every PO and trigger alerts any time invoices and POs don’t match. Fuel invoice reconciliation and tax reconciliation software is available from multiple vendors.
Ensuring that you pay only what you owe demands vigilance. For more detailed information on how to protect yourself, download Don’t Pay That Fuel Invoice.
- 1. FuelQuest. Accurate Invoicing: Building Trust Between Fuel Supplier and Buyer, 28 June, 2013. Web.
- 2. Associated Press, Shares of Spirit Airlines, long a Wall Street darling, fall on reduced profit-margin outlook. 8 October, 2014. Web.
© Avalara 2015.