Comments Off on Advances in F&I technology should lead to decreased compensation
By Phil Villegas
Over the course of the last several weeks I visited 3 different dealerships that are using docuPAD by Reynolds. For those of you unfamiliar with docuPAD, it is a large screen that sits on an F&I managers desk across from the customer. Per the Reynold’s site “It provides personalized menu presentation, presents forms in an electronic menu format, discloses necessary contract and lease information, and captures files in an electronic deal jacket.” I wouldn’t consider myself a techie, but I certainly appreciate the innovation to improve uniformity and compliance during the presentation of F&I products.
During these visits I’ve inquired of the dealers using the docuPAD about their general thoughts. The dealers generally liked the systems after getting through the initial implementation, but they felt that they have not yet experienced a measurable increase in the F&I PVR. Though, all three commented on the timing and efficiency with which clients are now [...]
Comments Off on If you are not receiving payments for parts scrap, who is?
By Marilou Vroman, CPA, CFE
In recent months we’ve had a lot of activity surrounding the topic of parts obsolescence and scrapping. Perhaps It’s a result of year end parts inventory physicals, where obsolete parts are more likely a topic of conversation among dealership management with the interest to free up some frozen capital and use the cash for fresh parts inventory.
Interestingly, we find highly inconsistent practices from one dealership to the next when it comes to how obsolescence and scrapping of cores and “worthless” stock is handled. What is quite steady however, is the practice of writing off inventory. Interestingly, we find a disconnect between writing off inventory and the ultimate disposition of these items.
Consider a $500 part that has not been receipted or sold for 12 months. By some standards, this part would be deemed obsolete. This part still has some value to someone and there is a good chance of [...]
Comments Off on Dealers should not always rely on reports being printed for them
By Phil Villegas
As internal auditors and forensic accountants, we always approach most operational and accounting reports with a degree of skepticism because we ultimately know the impact that human behavior can potentially have on these reports. To emphasize how important it is for us to know the reports and data we are looking at are pure and unaltered, it is standard protocol for us to require our clients to provide us system access in most of our engagements. We will seldom, if ever, rely solely on client reports if the reports have not been run by one of our associates. While this can often create increased workload for our team, it’s fundamental to what we do.
The recent story below, which is true will highlight the importance of this.
One of our analysts, who was not as well versed with the UCS as he is with other DMS systems, had requested a copy of [...]
Comments Off on Choose to invest in existing operations before investing in others
By Phil Villegas
For most of my automotive career I’ve been around dealership buy/sells, first as an employee at a dealership, then for a dealer group that was acquiring stores, and lastly as an advisor to dealers in these transactions. Over this time, I’ve had the opportunity to witness a wide variety of what makes some deals work and others not so much.
In circumstances where transactions went very well, I’ve found that it’s a progressive evolution of the dealer, where expansion comes on the heels of maximizing current operations. These dealers have put themselves in a situation where they have generated strong financial performance and developed a deep management bench and look for new stores to provide their capital and team members a platform for continued success.
Which raises the inherit question as to why certain dealers expand when there is still plenty of growth and opportunity at their existing stores. For most public [...]
Comments Off on Mandatory vacations – A good internal control or just textbook?
By Marilou Vroman, CPA
As controllers, CFOs, and dealership auditors, we have heard it many times before – “Require mandatory vacations as a good form of internal control.” As with many things in life, the textbook version makes perfect sense to do. But should this be a part of your dealership’s employee manual?
Mandatory vacation is great from the standpoint of encouraging your employees to take time off to rest, spend time with family and find work-life balance. Mandatory vacation as an internal control is built on the premise that if an employee is performing certain acts which may be deemed inappropriate, risky or fraudulent, these acts could be discovered or surface while that individual is on vacation. Essentially, the employee’s daily pattern of behavior gets disrupted. On the surface, the mandatory vacation makes perfect sense, but as you dig deeper, this policy may not be as effective an internal control as one may think.
Comments Off on Image compliance is required, customers liking your facility is optional
By Marilou C. Vroman, CPA, CFE
Over the years, I’ve had the pleasure of visiting hundreds of dealerships, both as a consultant and a client. It seems image compliance has become a central point for dealers to ensure uniformity in brand presentation, recognition by customers, and at times, to earn incentives from the manufacturers. While compliance is important, and most often required, how much of that capital investment will yield a direct benefit to your customers?
Interestingly, I find dealers spend millions of dollars to comply but some of the greatest returns on investment come from the smallest of dealership expenditures. For example, let’s discuss coffee. We are all familiar with Starbucks, which centers its business around providing coffee and a comfortable and pleasant place for its customers to willingly spend time working, meeting acquaintances, or just relaxing. In contrast, we’ve all had it, the dealership coffee which tastes as though it should be dispensed [...]
Comments Off on Experienced Personnel can Mitigate Cost and Stress at Buy/ Sell Closings
By Phil Villegas
During my career I’ve been part of dozens of dealership buy/sell closings, and they all have a common thread in that each closing is entirely unique yet will undoubtedly have a certain level of stress associated with it.
To put it simply, the largest stressor of any closing is that one or both transacting parties want to screw the other over. Call it financial discretion or competitive gamesmanship, either way, this approach by many dealers at a closing can often be counter-productive, not to mention very costly if the parties are not properly prepared.
From the calculation of vehicle credits, identification of incentives, validation of fixed assets, valuation of miscellaneous and parts inventories, to the determination of liabilities to existing customers and vehicles that have already been reported as sold, there are several areas for either a buyer or seller to easily be taken advantage of.
Comments Off on Creative customer discounts – good for the customer, bad for the dealership.
By Marilou Vroman, CPA, CFE
They say pay plans motivate behavior. In dealerships, this is often true but unfortunately, the behavior that is motivated could put the store at risk. Specifically, the behavior we are referring to today is the practice of “creative discounting”.
Dealership personnel who are responsible for generating sales will typically be motivated to keep gross as high as possible since their pay is often based on a percentage of gross profit. At times, the pressure on departmental or individual performance is so great, employees may seek alternative methods to creatively discount a sale without adversely impacting gross profit and hence, their pay.
For example, a retail vehicle sale could be discounted without impacting gross by removing other amounts that are typically to be collected at the time the sale. Sales tax is often one of the largest amounts collected, and the tax rate could either be reduced or removed from the [...]
Comments Off on New Year’s Resolutions for You and Your Dealership
By Phil Villegas
One of the beautiful things about the New Year is that we take it as an opportunity to reset certain aspects of our lives and make a concerted attempt to do better in the year to come. Whether it’s a commitment to losing weight, quiting smoking, volunteering time, pursue another degree or simply to take that dream vacation, New Year’s resolutions give us a clear starting point from which to embark on enriching our lives.
This should be no different for your dealership and there’s no better time like the New Year to implement or roll out efforts to improve your store. Just like in our individual lives, the prospect and possibilities of the New Year are endless and this is no different for a dealership. Just like there is not a perfect person, there is not a perfect dealership, there is always room for improvement. Some New Year’s resolutions for your [...]