In dealerships, pay plans are typically designed to motivate behavior that is beneficial to the dealership. In simplest terms, sell more cars, earn more pay; generate more gross profit, earn more pay, turn your wrench faster, earn more pay. These are the basics. However, in reality we could only wish it were that simple.
As manufacturer caveats have increased influence over the dealership’s bottom line, so has the complexity of many pay plans. For example, with the tie in of CSI, SSI, SDI, SPSI, BB and countless other acronyms of manufacturer performance indicators with the large financial incentives from OEMs, it’s no surprise these metrics become heavily tied to pay plans.
Unfortunately, there is a costly byproduct of seeking to improve OEM metrics by tying performance to employee pay. The gateway is opened to pay plan manipulation and impaired communications with customers. For example, a common scheme we find in [...]
There are just some things in life that we don’t expect to be pleasant or enjoyable, like visiting a Dentist or getting audited. Then there are things that always leave me scratching my head as to why they become as painful as they do without need…like dealership Buy/Sell closings.
I’ve taken part in dozens of Buy/Sell closings, and while each transaction will have its own nuances, timelines and complexity, the issue that I have found to be at the core of the stress factor in closings rests on the “competitive gamesmanship”. It’s in this gamesmanship environment where individuals from each side of the transaction might try to “get one over” on the other side, regardless of how refined the terms of the asset purchase agreement are. Irrespective of the specificity and definitiveness of the terms or the language in the agreement, at the closing, the spirit and interpretation [...]
Comments Off on The Hidden Cost of Materiality Thresholds
By Marilou Vroman, CPA
As you may know firsthand, many automotive dealers are required to have regular financial statement audits or reviews performed to meet lender requirements, or at times, for piece of mind. While audits and reviews are important for third parties relying on the financial statements, all too often we find some dealers believe an external financial statement audit or review is also designed to detect fraud. While certain procedures may lead an auditor to detect fraud, procedurally, there are limitations such as materiality thresholds that may prevent inappropriate activities from being detected.
For those familiar with fraudster’s tendencies, embezzlements typically begin at small dollar amounts to “test the waters” and to identify if a scheme can be perpetrated without detection. Once the perpetrator has been successful with their initial scheme, the tendency is to increase the reward while the perceived level of risk declines. For example, a salesperson may collect $500 cash [...]
Comments Off on Who is monitoring your digital media content?
By Sam Flores
Dealerships operate under severe scrutiny in one of the most regulated industries. The digital age has brought about even more regulations, and even more risk to dealers. Whereas you only had to monitor radio, television and print ads, today, web-based marketing has exploded and so has the risk of non-compliance. Dealers need to constantly monitor their advertising on their websites as well as the information being published on 3rd party sites. But advertising is not your only concern.
The rise of social media has also become a new opportunity to market the dealership. And this too has brought on significant risk. Who monitors the content? Is it professionally acceptable? Who uploads the content? Who is monitoring access? Is there an action plan in place if misleading or harmful information is posted?
Monitoring the content is important and should be the ultimate responsibility of a senior manager that understands the company culture, regulatory [...]
Comments Off on WardsAuto MegaDealer 100 – Numbers Go Up and Up
By Phil Villegas
As seen on WardsAuto
In 1994, when WardsAuto began its list of 100 megadealers, it was a compilation of super-regional groups. The largest then was Hendrick Automotive, with 66 stores and $1.8 billion in revenue.
On the 2018 WardsAuto Megadealer 100, $1.8 billion alone won’t get you in the Top 25. (Hendrick is No.6 this year with total revenues of $8.6 billion. No.1 AutoNation took in $21.5 billion.) For the complete list,click here.
Unlike in 1994, when there were no public dealership groups yet, today’s compilation of megadealer owners includes publicly traded companies and private-equity firms.
The functioning dynamics and playing field of the Mega 100 has changed drastically from the inception of the list. It used to represent a reflection of top dealer groups that expanded based on reinvesting their capital into additional [...]
Comments Off on Who needs hackers when physical data is so easy to obtain?
By: Sam Flores
Every dealership runs the risk of someone obtaining unauthorized information which could be potentially harmful to the store or more importantly, its customers. You might think potential breaches in data security these days is isolated to hackers gaining access to your computer systems. But a great deal of risk still exists from the deficiencies in the security of physical sources of information, such as copies of credit applications left on a sales desk, drivers licenses left on the copier, deal files left in an unlocked F&I office. I am surprised at the number of times I have walked into a dealership storage room or office containing easy access to sensitive information simply because it appeared as if “I belonged” or was permitted to be there.
Simple tips to minimize the unauthorized access include: ensuring than all offices and storage areas are kept locked and displaying sufficient and appropriate signage instructing dealership visitors [...]
Comments Off on It’s not only about identifying vehicles on the schedules or floorplan
By Phil Villegas
We often come across dealerships where the process of taking monthly physical inventories is a bit relaxed. When asked about their physical vehicle inventory procedures, we are often told:” Yes, we do physicals…our sales department handles that” or “Our bank does a floorplan check monthly” or “Yes, we have a porter touch all the cars.” While these might be elements of verifying the vehicle inventory, these approaches do little to identify any missing cars.
We typically recommend:
Have an individual who is independent of the sales department write down/scan all cars present on the lot. Do not provide an accounting schedule or other listing of inventory to those conducting the physical.
The results of the physical inventory should be reconciled with accounting schedules to identify both vehicles missing from the lot and vehicles missing from the schedules.
A reconciliation summary of the status of all missing units should be properly investigated [...]
Comments Off on The Importance of Monitoring DMS User Profiles
By Sam Flores
How often do you review your company’s DMS user security profiles? You might be surprised at the access some of your employees may have. I have seen cashiers having the ability to void and adjust cash receipts, and accounting clerks with access to payroll information!
There are several reasons why employees could obtain system access to functions or information outside of their scope of work. For example, an employee may have been granted temporary access to perform a vital function in response to another employee calling in sick for the day; or helping cover extra work load during month-end. After the chaos settles, it is very easy to simply forget to change the user’s security profile back to what it originally was!
Many new hire employee profiles are created by simply using an existing employee’s profile and copying the template to a new user ID. New employees often wind up having more [...]
Comments Off on The costly proposition of understaffing the accounting department
By Marilou C. Vroman, CPA, CPE
We often encounter dealers who ask: how many people should we have in the accounting department? As retail automotive advisors, we love to reference NADA, which has a guide of 15 total employees for every one accounting staff. Our answer is typically: NADA guide, plus one.
The accounting department is a cost center which is typically difficult to calculate an ROI. However, in an environment where cash is king and profitability is everything, justifying additional headcount is often frowned upon. Why would we want to add more people?
Accounting staff are often playing catch up, feverishly billing the stack of deals that comes up the last day of every month, preparing commissions, meeting tax deadlines, processing timely payroll and so on. We find the pressure on staff to just “clean” the schedules each month is often so great that thousands of otherwise collectible dollars are written off with little [...]