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Are You Losing Money Across Your Operation?

by Dealertrack
on September 11, 2019

This article originally appeared on Digital Dealer here.

Just like we run our homes and our lives, we run our businesses by our calendars. It keeps us on track, organized, and efficient. However, the monthly “must do’s” in the dealership – from administrative work to data cleaning, inventory check-ups, and talent acquisition and retention – have become overwhelming and expenses are adding up.

Consider this: In 2018, NADA reported an average dealership’s expense structure was 100.2 percent of its gross profit. In the first quarter of 2019, this skyrocketed to 106 percent. Fortunately, in Q2, NADA saw this rate finally drop back into the green at 98.5 percent.

But the story can’t stop there. Dealers can’t afford to settle on a 1.5 percent gross profit margin. Rather, they need to take the next step toward right sizing their expense structure, and that means efficiency, efficiency, efficiency. Where better to start than by looking into the system that touches every part of the dealership – the DMS?

However, as the saying goes, you can’t boil the ocean. In other words, don’t try to take on all aspects of the DMS at once. Instead, we are introducing this new series to help take you step-by-step through some of the most common seasonal “must do’s” to keep your dealership running efficiently all year long.

First up on the calendar is model-year turnover season.

Your Personal August “Must Do’s”:

  • Start back-to-school shopping, get your last beach days in, prepare for Fantasy Football draft, make plans for Labor Day.

Your Dealership August “Must Do’s”:

  • Prepare for model-year turnover season. Address any and all account changes, from removing old or unnecessary accounts to adding new ones.

It’s already nearing the end of August and that means fall is just around the corner. But in the auto retail world, it also means a busy changeover and selling season.

Not every model year changeover is massive, some years are easier than others. Either way, it’s important to find out as soon as possible from your OEM what you can expect – major or minor. That way, you can plan ahead.

This year, at least one OEM has indicated plans for significant model line changes, which will necessitate nearly 200 new account additions to a dealer’s general ledger. In broader terms, for every model line modification an automaker makes, it is not unusual for it to generate three to five changes to a dealership’s accounting practices. If you multiply that out across several brands or automakers, that could mean a substantial amount of administrative work that you will want to get ahead of.

As a result, whether it is a major or minor year for model changes, you will need to take swift action to get new accounts added, validated and routed to the corresponding sections of financial statements and related documents to ensure your reporting is accurate from the minute the new vehicles start rolling in. There’s also the task of removing old accounts for models that have retired and executing a merger of accounts when the OEM indicates it’s necessary.

The average dealership has between 800 to 1,000 accounts in its general ledger chart (assuming a dealer has one brand). That can be a lot to manage and update. Here are some key do’s to help you through this busy time of year.

  1. DO keep up with physical inventories. Whether you do these as spot checks periodically or once a year, it is a good idea to compare what the computer is telling you to what you actually count is on the shelf or in the bin.
  2. DO consider your DMS provider as a partner and resource to assist in easing model-year changeover. Do you have the right technology provider in place to help make implementing changes a seamless process? Do they offer any “white glove” services – where they will handle adding all new accounts to your general ledger, manage all financial statement routing, and make the required changes to the related documents for you? Or, are you on this journey alone? The right provider can be the key to several other “rights,” including the right tools and right processes to keep your entire team moving effectively, no matter how much administrative work you need to address.
  3. DO look to your peers as resources and explore any online materials your provider may offer, such as video tutorials, eBooks and peer-to-peer learning exchanges. You aren’t the only one going through model-year mayhem, so don’t be afraid to ask questions and leverage on-demand training opportunities to set yourself up for success.

Stay tuned for more as this was just part one of an article series covering “must do’s” to rein in expenses and drive efficiency at your dealership

About the Authors:

Susan Moll is Senior Director of DMS Field Services for Cox Automotive and Matt Hurst is Senior Director of Tech Client Support for Dealertrack DMS.

This article originally appeared on Digital Dealer here.

Tags: DMS

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