OAKBROOK TERRACE, Ill. — In a penny-margin business, fuel-payment inaccuracies—everything from overpaying taxes to out-and-out fraud—can cost convenience-store retailers thousands, if not millions, according to speakers at a recent CSP webinar on fuel invoicing.
Pointing out two high-profile cases of fuel-invoice mismanagement, Gary Davis, senior product manager of the excise business unit for Avalara, Bainbridge Island, Wash., noted the fraud allegedly perpetrated by individuals at Pilot Flying J, which came to light in 2013, and an underpayment of taxes in the case of Spirit Airlines last year.
In the case of Pilot Flying J, the Knoxville, Tenn.-based company paid $85 million in civil penalties and a $92 million federal penalty. In the case of Spirit Airlines, Miramar, Fla., the company found that it underpaid its fuel taxes by $9.3 million, sending its stock plummeting 5.3% in one day, Davis said.
Though these cases were notable “aberrations,” Davis said, “This is the kind of thing that can happen if you’re not vigilant, don’t understand [the numbers] and simply pay invoice.”
Davis and his co-presenter, Ryan Mossman, senior director of managed services for Insight360 at FuelQuest, Houston, said fuel-price volatility and constantly changing tax requirements can confuse retailers and lead to substantial losses.
In a 2013 FuelQuest study of trucking companies, a third of respondents said they only checked a portion of their invoices, Mossman said.
The two speakers suggested tips that can help retailers avoid errors, including the following:
- Validation. In the case of fuel, retailers need to secure strong supply contracts; leverage pricing providers like Argus, OPIS, Platts; and tie fuel surcharges to Department of Energy indexes or other transparent sources that help demonstrate true market prices. On the tax side, retailers have to make sure they’re up on all changes on both the state and federal levels.
- Spot checking. While retailers might not be able to review and reconcile each and every invoice, spot checking is a solid practice, especially when buying circumstances change (new terminals, products, etc.)
- Automation. Different services both on the fuel pricing and taxation sides can provide some relief, as these solution providers constantly monitor the changing landscape.
Retailers have a common goal of saving money, Mossman said, which they can accomplish by finding errors and reconciling corrections. “But the best practices [are] control and visibility, paying the best price, but getting fuel only when you need it.”