Comments Off on Where is opportunity cost of wholesaling reported on the dealer financial statement?
By Marilou C. Vroman, CPA, CFE
If you are like many dealers, you look at the variable operations section of your manufacturer financial statement and review your PVRs (gross profit per vehicle retailed) and most will contemplate how that number can be increased next month. Moments later, you will scroll a bit further down and look at your wholesale gross profit. If you see your wholesale gross profit hovering around zero, which many of us have been conditioned to believe is “OK”, we accept the number, wish for more, and then refocus on retail. The reality is, wholesale gross has as much to do with retail, as the act of retailing itself.
Wholesale gross is typically budgeted at zero gross profit, and if you have an engaged used car manager, this will often be the case. The risk in looking at the monthly total, is not fully knowing the underlying transactions and the opportunity cost [...]
Comments Off on The Importance of Employee Retention
By Sam Flores
The auto industry has typically been known for its high turnover, and not just in sales and F&I; other departments face this issue as well. It is a constant struggle to hire, train, and then retain employees. Management focus on employee retention is a key to eliminating the constant recruitment cycle.
How do you “keep” employees? Employees value being valued. But how do you measure “value”? A workforce is diverse, and not all needs, or motivations will apply to all employees. The goal is to build high morale by understanding the diversity in your workforce and meeting their specific needs. Some important elements to building high employee morale include: establishing training programs for continuous improvement, conducting periodic reviews, and creating a strong succession plans to promote from within.
As the economy gets stronger, it becomes more competitive for hiring companies to recruit from the same talent pool. More importantly, you run the [...]
Comments Off on Does your Dealership have a One-Way Policy with Deferring Losses?
By Phil Villegas
When was the last time your General Manager wanted to spread a large gain over a few months or to pick it up during the 13th month entries? Chances are you have never heard these words spoken and likely never will. However, most of us have encountered the situation of a General Manager or Departmental Manager wanting to spread or defer a loss over several months.
Whether the loss is a large shortage in a parts inventory, a legal settlement, an uncollectible wholesale receivable, a warranty audit chargeback, there are multiple reasons which are often presented with an attempt to justify spreading or deferring a loss. Reasons like wanting to avoid showing a large dip in profitability or to “smooth” the financials, and in some cases wanting to label the item as truly extraordinary and run it through as a 13th month item to essentially completely avoid the financial statement. In the [...]
Have you ever wondered how many times you get asked the same question regarding a routine procedure such as how to code an invoice, or how to process a manual check? These questions, however easy they may be to answer, take time away from the more important tasks going on in the office. It is important to standardize these routine processes to minimize the constant “training” of employees.
Standard Operating Procedures (SOP) can be a helpful tool because routine tasks are not left subject to interpretation by the person assigned the task. In many cases, employees will do their job based on the way they were taught to do it, usually the last employee assigned the task, but this may not be the most efficient, or technically proficient method. By creating SOP’s, you develop a standard method of follow procedures that are in line with company policies. You will now have a [...]
For a few select franchises, the desirability of some of their most popular models will often attract a cast of characters looking to get their hands on one of these hot cars…the characters we are warning you about are not customers, but rather brokers.
There are brokers and individuals who make a living of sourcing hard to obtain popular models only to flip these vehicles to another customer for a profit. Often, these vehicles can end up being exported and end up costing the dealer chargebacks of incentives by the manufacturer and potential loss of vehicle allocation on that and other popular models. Time and time again we have seen where dealer sales management has engaged in transaction activity with brokers and time and time again we find the gross profit on these sales are well below traditional profitability margins.
The vast majority of broker related transactions are short sighted and have [...]
Comments Off on Are we relying too heavily on technology to identify check fraud?
By Marilou Vroman, CPA, CFE
Remember the days when bank statements would arrive at the dealership in large packages with pages and pages of statement activity and all the original cancelled checks that cleared? Perhaps you remember the days when the bank would call when a check had only one authorizing signature on it or the signature didn’t look exactly like an authorized signer? For many dealers with relationships with larger banks, these days will probably seem like a thing of the past.
Today, so much of our daily banking activity has become technologically more sophisticated – disbursement checks are scanned, and the originals are rarely, if ever, returned. Account balances are available 24/7 and statements may be delivered electronically. Even “positive pay”, where the dealer can provide the bank with payees, dates and amounts of cash disbursements in advance for the bank to validate, helps to ensure payments are valid and not fraudulent. Bank [...]
Comments Off on It’s no Holiday when employees’ responsibilities are limited to one individual.
By Phil Villegas
I’ve noticed certain reoccurring patterns in many of the dealerships I’ve had the opportunity to visit. There always seems to be that one particular, heavily relied upon individual who tackles certain tasks. No one else would even dare to complete the tasks and responsibilities of this individual if they went on vacation. Instead, they would opt to let the work sit and wait for the employee to return. While under many occasions this can be completely innocent with no ill will, more often than not, there can be major risks associated with this. Many of the cases of embezzlements I’ve encountered have often been linked to job responsibilities that are specific to one employee. The dealer’s losses become compounded and can extend for longer periods of time because no one checked or picked up the tasks of this individual.
We discovered an instance of this during one of our internal audits. A [...]
One of the most underappreciated components of running a dealership is the ease of access. Like going to a great restaurant and finding no place to park and therefore deciding to go elsewhere. When was the last time you assessed your parking requirements? Do you designate parking space for employees, customers, vendors, deliveries, and others? Do you have parking layouts during construction projects and remodels? Do you have enough spaces available for your customers at peak times?
Lack of parking can lead to lost opportunities because of customers unwilling to “fight for a spot” at your dealership. Customers know they can get the same vehicle from other franchised dealers in the region. Therefore, customer service, convenience, and ease of accessibility become even more critical. Especially at a dealership where the average person can spend several hours per visit.
One quick way to help ease the burden of finding a parking space is [...]
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 [...]