By Marilou C. Vroman, CPA (mv@axiom-auto.com)

Published in: Professional Auto News

Business intelligence describes the methodology of extracting business data and turning it into valuable information to help business owners and managers make better business decisions. As a dealership goes about its daily business, the Dealership Management System (DMS) is working behind the scenes, capturing transaction history, as well as details about customers, vehicles and employees. The general assumption by most dealership owners is that all of the operational history necessary to generate valuable business intelligence is available on demand, with a moment's notice at a future date, all through the DMS. The truth of the matter, however, is that this assumption could very well be wrong.

There are a number of reasons why valuable business data might ultimately not be saved in the DMS. First, given the amount of data generated in a typical dealership, it is likely that some information may not be recognized as having sufficient value to be retained in the first place. Second, in order for data to be retained and retrieved, it must be accurately and completely input into the system by dealership personnel. Finally, DMS systems have user defined options regarding the type of information and detail that is retained, such as which accounts are included in the general ledger history, and which reports should be required versus optionally archived at month end. The finance and insurance module, for instance, usually has a limit on the number of days to retain a deal. Parts transactions may only be kept for two years or less. As a result, information that may be useful could actually be deleted because of the way that the system's user defined options have been set up. A thorough examination of the DMS data retention policies is strongly recommended to ensure that the dealer's expectations are met. Further, a periodic review of archived records should be completed to be sure the dealership's history is complete.

As quantities of data are expanding exponentially, some system administrators will find justification for reducing the amount of data that exists on their databases. Some DMS providers encourage dealers to limit the amount of electronic history that is retained on their server due to storage or performance limitations. That being said, the value of missing data is often not known until the day that it is needed. Some would say that history doesn't repeat itself. But what if it does?

The dealer can use historical data to extract useful information about customer purchasing patterns. A report generated from the F&I history may reveal the tendency of customers to pay full MSRP for new silver vehicles or to negotiate the price down to rough book value on used white vehicles. Transaction history can also reveal whether seasonal fluctuations have an effect on the sale of extended warranties or aftermarket accessories. This type of data is typically readily available in the DMS. As customer preferences change frequently, just one or two years of history may be sufficient to confirm those preferences and effect the necessary change in the vehicle inventory or the sales department's approach. In the interest of increasing revenues, this information can be very valuable. However, within the dealership's history, there are also patterns of data that could reveal significant risks to the business, including financial losses and fraud.

For example, the history may reveal that an employee is using company assets inappropriately for personal financial gains. A parts department employee could have been manipulating the parts pad (inventory record) to cover up missing or stolen goods. While an annual parts physical may reveal a shortage in the parts inventory, the physical inventory process itself may not reveal how or why the shortage had occurred. Is there a problem in the accounting department where invoices are not being posted correctly? Is there a pricing issue in the parts pad that is leading to a variance? Or have the parts been walking out the back door? Without the sufficient and accurate detail of historical activity in the parts pad paired with the accounting records, those questions would be difficult to answer.

Consider a case where a lead technician with the best efficiency in the shop has been stealing dealership customers by doing repairs on the side with stolen parts for cash in direct competition with the dealer. While the dealership should be watching for indicators of this type of behavior in the ordinary course of business, the activity may not be discovered for years. The service manager may not expect this behavior from a stellar employee, but a review of historical patterns may reveal activity in the system on weekends, or missing repair order numbers. In this case the dealership would need to have access to detail parts and service history to piece together the lost revenues. If the employee has been stealing from the dealership for seven years and the DMS retains only three years of history, piecing together the evidence to build a case or to calculate the losses for filing an insurance claim may be a significant challenge. The greater the amount of transaction detail that is available, the greater the likelihood is that the dealer can win the case. Some useful reports to archive that a DMS may not archive by default would be an annual parts transaction history, repair order operation code and labor type history, technician labor hours and repair order history, as well as detail vendor payment history, check register and user activity reports.

With the cost of data storage becoming progressively less expensive in recent years, it is well worth the time and investment to either increase server storage capacity to accumulate more valuable history or, if the dealership's DMS has storage limitations, seek alternative electronic storage from third party providers.

One additional benefit of data retention policies is the increased awareness of dealership personnel that detailed records of their actions are being retained, reviewed, and analyzed. With the history readily available, employees may have an increased sense of accountability for their actions, not just when it comes to departmental profitability, but in their overall behavior in conducting their daily business. The data is the tachometer on the dealership's dashboard. Without clear visibility of operational performance, the dealership's engine could redline.