Stay Ahead of Medical Device Competitors with Your Vehicle Program

March 2, 2018 Ben Reiland

What Business Vehicle Program is Best for Your Medical Device Company?

From start up to lift off, the medical device industry must prepare for fast growth. So what’s the best business vehicle program for your new sales team? What program will put you ahead of your competition?

Fixed and Variable Rate

Look no further than the fixed and variable rate (FAVR) program. As the title suggests, this business vehicle program reimburses for fixed costs associated with ownership (insurance, taxes, depreciation, registration) and variable costs associated with driving (fuel, maintenance, tires). What makes FAVR the better choice when compared with other options?

1. Scalable

This program grows with your company. Whether you have five mobile workers or 500, the FAVR program will see them reimbursed properly. 

2. Equitable

Unlike other options, this program ensures that mobile workers are not only reimbursed for the distance they drive, but additionally for their ownership costs.

3. Outsourced

Any business vehicle program will require the additional administrative burden of managing it. Fortunately with FAVR, management can be outsourced to experts, removing the burden of excess admin work, especially as the successful start-up grows quickly.

4. Non-taxable

As long as the program adheres to compliance standards it is also tax free. Additionally, a majority of FAVR programs use mobile apps to automate the process.

5. Customizable

Companies can establish FAVR reimbursement rates based on their own specific business travel needs. Reimbursements are always based upon vehicle costs that specifically meet one of a variety of different business needs such as a small sedan, an SUV or even a Pick-up truck. FAVR reimbursements always reflect the exact ownership and operating costs where employees live and drive rather than receiving the same reimbursement everywhere.

That's five reasons FAVR is the best business vehicle program for your medical device company. So what about the other options?

Car Allowance

A lot of medical device companies choose a simple and easy car allowance program that pays their mobile workers a certain amount every month. And why not? It’s a simple program with predictable costs. But for a med device company, a car allowance program is less than ideal for two major reasons.

1. Uneven distribution

With a car allowance program, every mobile worker is paid the same. On its face, this seems like “equal treatment.” But for those reps who drive greater distances within their regions? They may be underpaid for their business travel. Not to mention, the price of owning and operating a car varies by geographical location. This simple and easy allowance is not the best morale booster and actually can lead to incomplete territory coverage.

2. Tax Waste

Employees lose an average of 30% of a vehicle allowance in tax waste. That’s a hard number to swallow, no matter how great a company you’re working for. And the company has a matching payroll tax expense.

Cents Per Mile

Another popular option is mileage reimbursement or the cents-per-mile (CPM) program. Instead of receiving a fixed amount every month, mobile workers are reimbursed at a cents-per-mile rate for business travel in their personal vehicles. Let’s say Sales Rep John drives 2,000 miles in a month and the reimbursement rate is 54.5 cents. The company would pay him $1,090 for his business travel.

As the program functions based on captured business mileage, mileage records are mandatory. To be IRS compliant, every employee reimbursed per mile for business travel is required to keep a compliant mileage log. Check those boxes, and there’s no more worrying over an audit. Sounds pretty good? Well, CPM isn’t without its issues.

1. Under/Over Spending

When mobile workers drive less than 8,000 miles for business travel, CPM programs generally under-reimburse the drivers. If they’re driving over 12,000 miles, the CPM rate generally over reimburses. That might not be an issue at a company’s beginning, but the problems will grow with your company. Will your drivers spend 80% of their days on the road? Plan for that possibility now so you won’t worry later.

2. Geography

Starting off small, gas prices may not be an issue. However, as the company expands and mobile workers are located in regions all over the country with wildly different gas prices, the static CPM reimbursement will be too high for some and not enough for others.

3. Compliance

Having a compliant CPM program is not as easy as it sounds. Many mobile workers fail to keep compliant mileage logs. Programs continue to rely upon manual logs instead of mobile applications that automate the process. Writing every piece of information down before, during, and after the drive takes time away from schedules that are busy with other tasks.

We can’t tell you how to sell your product, but we can help you make the right choice when it comes to business vehicle programs. The simplicity of car allowance programs may be of interest in the hectic time frame between starting up and explosive growth. Cents-per-mile reimbursements have a similar draw. But FAVR is the reimbursement program that will see your company into the future, growing with your successes every step of the way.  

About the Author

Ben Reiland

Ben Reiland is a Content Writer at Runzheimer.

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