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 [...]
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 [...]