Category Archives: General

Best Practices That Can Boost Your Bottom Line

Posted on by

I always enjoy speaking with Dealership Managers; not just because I’m helping them, but because, for me, it is a reminder of why I do what I do.  I appreciate the stories I hear because they help me continue to improve the Profit Blueprints System and the Action Plans.  The following are three stories that reinforce why watching your numbers keeps your profits strong and why the Profit Blueprints System works to catch small problems – before they become big problems.

There are many components in Profit Blueprints that provide valuable information, but highlighting problems and opportunities using Smart-Colors is the part that saves you time—your most valuable asset.  Your financial statement shows current month and year-to-date information which is good data, just not great data.  It is easier to track a trend when you can compare your numbers to previous months’ numbers.  But the colors and clipart comments help the numbers tell a story.  It was the red that alerted Ron H., a Service Manager, to a problem.

You know how it is…you take a few days off and everything goes to hell in a hand basket.  (Okay, maybe it wasn’t that bad.)  But, it was at this time that the General Manager went to the Parts Manager to announce that the markup on sublet to their sister stores was going to be reduced from the standard markup.  Well when Ron, being astute and not color-blind, saw the sublet account that had never seen red a day in its life, suddenly appear like a hot fire ball, he got to the bottom of it. It seems there was a miscommunication and the Parts Department had reduced the markup on all sublet items.  Problem solved! Life is good and Ron can go back to being a super hero, knowing the extra set of eyes is watching to keep every account on track.

Best Practice: Changes in policies should be in writing and all involved parties should sign off that they understand the new process. 

While the red on his report helped Ron discover a problem, the same color helped Mike, a Body Shop Manager in Michigan, catch his problem with a vendor.  Mike, who is always trying to make a little more profit, watches every account like a dog guarding a new bone.  When he received his Profit Blueprints report, he saw the net of Paint and Materials percentage retained had dropped dramatically, thus it had turned red.  Mike followed one of the recommendation on the Action Plan: he had Accounting pull every invoice for supplies from the previous month and discovered that one company had over-billed him (inadvertently or intentionally) 10x the quantity he had ordered and received.  At this Dealership invoices went from directly from the Parts Department to Accounting.

Best Practice: Invoices should always be reviewed and signed by the Department Manager before they go to the Accounting Office.  Also, don’t forget to complete the purchase order with the expected total price.

Most Parts Departments hit the suggested targets for Gross Profit percentage with hardly ever getting into the yellow, let alone red.  We know if we charge too much for parts, we’ll lose Customers and if we charge too little, we’re just giving away profit.  The Parts Department is the baby bear in Goldilocks and the Three Bears and everything seems to be “just right” – most of the time.

Although the colors hadn’t gotten to red yet, the clipart comment added to the report pointed out to Jessie that the Gross Profit percentage on Counter Parts Sales had dropped two months in a row, without a huge Sales increase.  One month might be an anomaly, but two months indicated we should look into it.  The first thing Jessie did was run the detail of the Sale Account and the detail of the Cost of Sale Account…and low and behold one report was much longer than the other report.  Logic dictates that with Counter Tickets, the number of Sales and Cost of Sales entries should be the same (if there are no coupons). It seemed that a new discount had been added to Service Invoicing and was “mapped” to the wrong Account number, hitting the Parts Counter Cost of Sales instead of the Customer Pay Parts Cost of Sales.  Once corrected, Jessie was now able to see how much that new discount was reducing the Customer Pay Parts percentage, and all was right in the world of Counter Retail Parts.

Best Practice:  Monitor your Gross Profit Percentages, every month compared to previous months,  for unexplained changes. When you see something off, quickly get to the bottom of it and fix it. 

 

Benefits of a Mentoring Program in Your Dealership

Posted on by

Seventy-one percent of Fortune 500 companies offer mentor programs to their employees. If you don’t have a mentor program in your dealership, what’s stopping you from implementing a Mentor/Mentee program in your department and dealership?

A mentoring program is not just directing a new employee to ask seasoned employees questions, it is a relationship between a less-experienced employee and his or her mentor who is seen as a role model—someone to learn from and to look for advice when needed.

Benefits for the Dealership: Mentoring reduces employee turnover, improves workforce productivity, extends the careers of older employees, and grooms future leaders. A mentoring program encourages your experienced staff to spread their knowledge and best practices to new employees.

Benefits for the Mentee: The new employee will feel less isolated—less like the new kid. A formal mentor/mentee agreement gives the new employee “permission” to ask questions instead of muddling through a problem for fear of looking ignorant. Fewer mistakes will be made and the learning curve is shortened. This is a win-win for the dealership and the employee.

Benefits for the Mentor: Peter Drucker (developer of the management by objectives concept) said: “No one learns as much about a subject as one who is forced to teach it.” As a mentor you have a new appreciation of your skills, and you learn from your mentee. You become even more of an asset to your Dealership as you fine-tune your leadership skills.
Does it take a special person to be a mentor? Anyone who can answer yes to the following questions could be a good mentor:
• Do you enjoy working with people?
• Do you respect your colleagues?
• Do you recognize when others need help?
• Are you patient and tolerant when teaching someone?
• Do you enjoy your work and want to share that excitement with others?
• Do you have sufficient self-confidence to help someone move ahead without feeling threatened?
• Do you see mentoring as an opportunity for personal growth?
• Do you find helping others personally rewarding?

If you had a mentor that helped you, contact your mentor to say thank you; express your gratitude on social media or make a financial contribution to a local mentoring program in your mentor’s honor. Best yet, pass on what you received by becoming a mentor to a person in your dealership.

Service, Body Shop and Parts Departments Cash Flow

Posted on by

Every business faces unexpected events which can strain its bank balance; the trick is to be prepared for them.  You finally got (and paid for) all of those recall parts, now you have to find the time to install them and wait for the factory to pay you.  A tornado or a hailstorm overwhelmed your Body Shop; you worked overtime to get the vehicles repaired, while you wait on insurance checks.  You were offered a fantastic buy on tires, but you can’t sell them all in one week.  These are just a few of the potential times when all of a sudden, “Where did all our cash go?”  The financial statement’s balance sheet shows the two main areas to look for that money – Receivables and Inventories.

When it comes to the financial statement, most managers see their role to make the profit and control the expenses. Cash flow is low on the list of priorities, after all, isn’t that accounting’s responsibility? Actually, cash flow should be everyone’s responsibility. For subscribers to the Profit Blueprints© system we analyze key accounts to save you time in monitoring your asset accounts. Not only do we track the monthly balance; we put it into perspective by comparing the balances to the appropriate sales accounts and show you how much cash, if any, is tied up in frozen assets.

To keep frozen assets in check, be familiar with the schedules and the accounts to understand where cash could potentially be hiding.

SERVICE DEPARTMENT

OPEN REPAIR ORDER REPORT.  This report could easily hide thousands of dollars of potential cash or potential write-offs.  Keep this report clean by closing Repair Orders promptly.  If not paid in full, close the Repair Order to a receivables account when the vehicle leaves the lot.  This will make it a “thorn in your side” when it starts to age and is   better than the labor and parts sitting on a report that few people review.  Open Repair Orders should have a vehicle on your lot; verify this at the end of every month.

SCHEDULES

Receivables

  • Confirm that you will be paid, before you extend credit. This includes Extended Service Contract companies.
  • Warranty Claims Schedule. Clearly defined processes and continuous training of staff will help collect and keep the warranty money.  The last page of your Profit Blueprints report tracks your Warranty Receivables in relation to your warranty sales.  If you are above the day’s supply target, the excess will show in green.

Sublet Schedule – Service and Body Shop

There is nothing worse then when you have to write off a balance on the sublet schedule because when the work was done – you thought you were going to be paid for it…then something slipped through the cracks and now you have to write off a balance.  Compare the Sublet Schedule to the Open Repair Order report every few weeks to make sure the two are in sync.  Shore up your sublet processes when you see a problem.

BODY SHOP

OPEN REPAIR ORDER REPORT   To free up cash and avoid potential write-offs, close Repair Orders when the vehicle is delivered to the Customer, don’t wait until the end of the month.  Open Repair Orders should have a vehicle on your lot; verify this at the end of the month by touching every one.

RECEIVABLES  The Body Shop should have a receivables schedule separate from the other departments.  The only balances on this schedule should be for Insurance companies you have a Direct Repair Agreement with; all other repairs need to be paid-in-full before the vehicle leaves the Body Shop.  Deposit Customers’ checks in accordance with your dealership’s policy.  Do all of this and you will have a picture perfect schedule.

PAINT AND MATERIALS  Because most paint suppliers deliver requested materials within hours of a request, there is little reason to stock more than a month’s supply.  If your financial statement’s balance sheet doesn’t breakout Paint and Material (P & M), we don’t analyze it on your report unless the inventory balance is supplied by your Controller.  Calculate your P & M supply of inventory by comparing your General Ledger Balance to your P & M Cost of Sales for the Month.  (Sales – Gross Profit = Cost of Sale)  Ideally, the inventory value will be around the average Cost of Sale.  Reconcile the General Ledger balance to the physical Paint and Material balance every month.  Do not let your paint vendor count this inventory!  And don’t let them place an order for you.

PARTS DEPARTMENT

INVENTORY

The Parts Department is special because even though the parts inventory can range from hundreds of thousands of dollars to several millions of dollars, there is no Accounting schedule to confirm that the General Ledger balance is accurate.

  • We recommend a monthly reconciliation of the General Ledger to the Parts Management Report to watch for growing gaps, but this does not assure that all the parts are on the shelves. Perpetual inventories, done 3 – 4 times a year, plus a physical inventory done by an outside company should confirm all parts are present and accounted for, 99% of the time.
  • Watch the days of supply as calculated on your Profit Blueprints© Report. 30 days is too skinny, while over 60 days may raise a red flag.  Parts managers will confirm when they got off the 30-day supply and stocked more parts – their sales went up!  Work towards the optimal range of around 45 – 55 days of supply.
  • Keep your eye on your stocking status and aging analysis from your Parts’ DMS Management Report. You could show the ideal days of supply, only to find out 30% of the inventory is over 12 months old.  Stocking Status (Normal or Active) is another indicator of the quality of your inventory with a target of 70%+ for most franchises.
  • Do everything you can to minimize Special Order Parts. If the part(s) could be here tomorrow – hold the vehicle.  If it is a Customer Pay Part, the part(s) needs to be pre-paid.  If it is a warranty part(s), the Customer has to confirm an appointment before the part is ordered.  If we saw those Special Order Parts sitting on shelves as hundred dollar bills, we’d do what we could to get them to the bank.

RECEIVABLES

The Parts Department should have a receivables schedule separate from the other departments.  The only balances on this schedule should be for approved Wholesale Customers.  Approved mean you also have on file a complete credit application and, if appropriate, a sales tax exemption number.  Only extend credit to companies who have good references, continuously pay on time and have a low percentage of returns.  Being weary of a Customer suddenly buying more than usual, this may indicate they have been cut off from other vendors—or it could mean you are doing a great job!  The Parts Department should be vigilant for Customers who drag their feet on paying.  By the third week of the month, most wholesale accounts should reflect only current purchases.

Each department manager has the responsibility to keep the cash flowing.  Review your responsibilities for your department’s cash flow.  With good processes and continuous monitoring, the bank account will be flush and you can focus on selling more and controlling expenses.

 

 

 

 

 

How to Improve Like a Pro

Posted on by

How do professional football coaches improve? They meticulously review previous game films to determine what they did right and where they need to improve. They also watch what the other Teams do right and determine how those plays can benefit their own Team. This is a successful plan that Profit Blueprints® can help you apply at your Dealership. We take a look at your operation with our Financial Analysis, then based on top-performing Dealerships’ Best Practices, we help you customize monthly Action Plans for each Department. Combine this with our monthly personalized Coaching over phone and you will see real results—almost immediately! You decide how to maximize our coaching—group conference calls, one-on-one with each Department Manager, or both. Check out the Profit Blueprints™ System. If you’re looking for some new ideas to start making Net Profit Improvements, call today at 877.316.7418.

We’re so confident in Profit Blueprints® that we’re offering a No Risk Guarantee to new Clients—this is a 6-month subscription, instead of our regular 12 month subscription and if you don’t show a Net Profit Improvement by the end of 6 months, we’ll refund your money. If you’ve already shown a Net Profit Improvement for last year over the previous year, we’ll use that data to establish a Net Profit Improvement Goal, and if we can’t get you to that goal with our Profit Blueprints™ System, we’ll refund your money.