Category Archives: Dealership Body Shop

5 Habits Of Exceptional Dealership Managers

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I hope you fall into the category of an Exceptional Manager. While the following is just my opinion, I’ve come with these points from speaking with managers and comparing their actions (both good and bad actions – not the managers) to their financial results (both good and bad) over the past 23 years.


Exceptional Managers Pay Attention to the Assets They Control. This may not seem like the most important habit but to me, it is indicative of how well a manager knows his or her department. If managers know these numbers, then it is likely they understand most of the numbers that pertain to their department and how their numbers relate to Key Performance Indicators and higher profits.


• Sales Managers should know: How many new and used aged vehicles are on the lot and how many new vehicles are in the pipeline to their lot. They should know the day’s supply of inventory by model.


• Parts Managers should know: The dollar value of parts over 12 months old and obsolete parts. They should be involved in the parts reconciliation to the General Ledger balance at the end of the month. They should know the day’s supply of their inventory, plus the day’s supply of Active or Normal Parts Inventory. They should know how much reserve they have to return unwanted parts.


• Service & Body Shop Managers should know: How many open repair orders are over 3 days for service and 7 days for body shop. They should know how many Customers are scheduled for the upcoming days and what the show rate is. What these departments sell is time, so they should know how much time is available every day.


• Accounting Managers should know: The bank balance is reconciled daily, and there’s enough cash to cover outgoing checks. The finance contracts are paid promptly, and the vehicles on floorplan vehicles are paid off when due.


Exceptional Managers Set Goals for their Department and Employees.
But Exceptional Managers just don’t set goals; they monitor them and coach employees who are falling behind and celebrate the victorious employees. They know how their numbers are tracking and anticipate where they will finish the month. The goals are the starting points for daily discussions with their staff.

Exceptional Managers Look at the DOC Every Day.
The name says it all – Daily Operating Control. Exceptional Managers know they can’t turn their back on their numbers even for one day; it’s like turning your back on a three-year-old. If you look at a DOC, set up with enough information, you know the exact day when something requires attention. I’ve seen some DOCs that were so long I wouldn’t even use them. I’ve seen DMS Dashboards that are so convoluted managers don’t both looking at them. Because DOCs don’t cost you anything extra, spend time to create numerous, useful DOCs for different purposes and the results will be DOCs that are reviewed every day.

DOCs help you scan your expenses quickly (DOCs should expand the expenses beyond lumped expenses like variable, personnel, semi-fixed, fixed expenses). If you have sub-accounts, detail those on the DOC to save time. For example, Service Policy Expense; we recommend sub-accounts such as lot damage, missed deductibles, warranty chargebacks, etc. If the DOC shows each of these account numbers, then the day the general ledger gets hit with a warranty chargeback, the manager knows the day and can research it now! The sales advertising account is perfect for subaccounts because of the variety of advertising expenses from pay-per-click to direct mail. When the manager sees a spike in an expense she can confirm she approved it.


DOCs allow managers to monitor Gross Profit Retentions; so the day there is a drop, the manager can examine the invoices from the previous day to see what happened.
For the sales department, DOCs let you know how many deals have been posted. Then if there is a large variance between what has been sent to the office and what is posted, the manager can check out what’s going on. You see which new models are selling and which aren’t – okay not a big deal this year but sometime in the future it could be important.
The power of using DOCs is frequently dismissed – that’s why I call managers who use them, Exceptional.

Exceptional Managers “Freak Out” When They See a Loss. Okay – not actually “Freak Out” but show enough concern to look into a problem before they assume anything. Whether it’s on a DOC or the financial statement, when something doesn’t look right, the exceptional manager doesn’t make assumptions; they ask why. They don’t Assume Anything. Once you understand why an Expense was high, or the Gross Profit was low, you can do something about it.

Exceptional Managers Don’t Make Excuses. There are very few problems that there aren’t solutions to – if you make an effort. “Oh woe is me, I can’t find any Techs.” “Because of COVID ___________ (Fill in the blank.),” “The weather..,” “Everyone else had a bad sales weekend so it’s okay.”
Many problems are exacerbated because of poor planning and failure to have contingency plans should something happen. “Waah, our computers went down, so we couldn’t write any repair orders” versus “okay, here are blank repair orders, start writing.”


Don’t let excuses be a default – it’s a bad habit to get into – you’re better than that! Benjamin Franklin said, “He that is good for making excuses is seldom good for anything else.”


These are just a few of the habits that help you be successful and show you are an exceptional manager. Take a moment and evaluate how you do on these crucial skills and if you think I should add more to the list – let me know!

What You Can Do at Your Dealership During the Coronavirus Crisis

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John F. Kennedy’s quote, “The time to repair the roof is when the sun is shining,” has never been more relevant. Don’t wait for the world to return to normal; seize this time to upgrade your processes and do all of the things “we don’t have time to do.”

Many or most of your current processes have built-in waste. With our free time, now is the perfect time to evaluate potential wastes. Waste is any step or action in a process that is not required to complete a process. Six-Sigma lists the 8 wastes of lean, as Defects, Overproduction, Waiting, Non-Utilized Talent, Transportation, Inventory, Motion, and Extra-Processing. I don’t know your dealership, but I’d wager at least one or two of your current processes embrace one or two of the wastes.

Besides reducing waste, consider implementing the 5S methodology to streamline your processes with visual control. The 5S Methodology helps a workplace remove items no longer needed. It starts when you remove (Sort) everything from a space. Then only bring back (Straighten) what you need and organize the items to optimize efficiency. Daily keep the area clean (Shine), so you can identify problems. My favorite step (Standardize) is to use labels and color-coding to be consistent. Finally develop the habits (Sustain), and implement the processes to best maintain your “new behavior” over the long term. (5S works just as well at home.)

New Behaviors

We will have to create new behaviors to accommodate Social Distancing (for sure the 2020 word-of-the-year) for your employees and customers. Consider flexible schedules for employees (half the accounting office works in the morning, the other half in the afternoon). For some positions, employees do their work from home. To engage your customers, create videos or flyers that answer their questions or solve their problems. Encourage your service customers to schedule their appointments (no more “just come on in”); maybe you want them to stay in their vehicle until your Advisor gets to them. Explain and show customers your “new” processes with videos and emails.

We will adopt “temporary” practices to accommodate and protect our customers – you never know these new practices could become your new best practice. Remember the ad from Mr. Mom (1983), “We at Schooner Tuna can sympathize with all of you hit by the hard economic times. In order to help we’ve decided to reduce the price of a can of tuna by $.50 until the crisis is over. After that, we will resume our regular pricing. Schooner Tuna, the tuna with a heart.” They adjusted their pricing for the times.

As a temporary practice, deliver parts to your counter retail customers just like you would for your wholesale customers. Offer curbside parts pick-up for parts paid for online or over the phone. If you don’t already have the capability for customers to pay online, determine what works best for you—use a vendor like DocuSign or work with your website vendor to establish a convenient way for customers to pay and go!

If you now offer pick-up and delivery for service customers, vehicle salespeople can be those extra hands. Salespeople can help their fellow salespeople with remote vehicle deliveries. If the salespeople are unwilling to help to maintain a paycheck, are they the people who will be with you in the long run? The Controller in me says always have two people go to a customer’s home or workplace to reduce potential liability issues from a “crazy” customer.

The Great Toilet Paper Shortage of 2020
When you can’t buy toilet paper, the lesson you learn quickly is to conserve resources. My first job as a Controller was at a Chrysler-Dodge dealership before Lee Iacocca revived Chrysler, and we were thrilled to make $4,000 in 1981. We were so cash strapped, (How cash strapped were you?) I would use both sides of the calculator tape. I hope you will never be in the position where a roll of calculator tape makes a difference. Still, in this time of uncertainty, there is a valuable lesson we all will learn from and perhaps be better managers when business returns to normal.

You may have reviewed your expenses at the end of 2019, but now you have a different lens to look through, one that also focuses not only on the best price but on reducing what you are using. Look at want versus need. Maybe I can look at that on the computer monitor instead of printing it out. Hey, Tech, you don’t need to put on new gloves every time you get a little dirt on them—wash it off and save a few gloves for others. Disposable is removed from the lexicon and replaced with I bet I can make this work. What you learn over the next few months will pay off for years to come in better processes and reduced expenses.

Hang on to Your Cash
I’m writing the definitive manual for dealership accounting (to be released this summer), and one segment that is applicable today is the Cash Conservation segment. Although COVID-19 wasn’t part of the plan, the ideas are even more valid in uncertain times when you spend more than you take in.
• Floor plan used vehicles (especially if your lender is allowing a grace period)
• Keep a vigilant eye on frozen capital – those resources used ineffectively. Collect those receivables and sell the old inventories.
• Tighten the credit extended to wholesale vendors.
• Pay bonuses to managers whose salaries are substantial, quarterly.
• Send out Accounts Receivable statements early.
• Make payments on a company credit card to extend the time to pay.

What to Do? What to Do? What to Do?
No one knows when you might have to furlough or downsize your staff, hopefully, you won’t have to. The rest of this article offers ideas to keep your valuable staff busy and productive—staff that you spent time and money recruiting and training. If you have folks quarantined at home and you are paying their wages, keep them in the loop with quick calls via Zoom, Skype, or other internet communications options. Most of these providers have free options.

Create a list of projects you’d like to accomplish to “up your game.” You probably won’t get to all of the projects, but you’ll have a list for the future when things are slow. Some of these ideas you can use even if your department is closed due to government mandates. With Zoom, you can see all of the employees’ smiling faces.

1) Create training videos. Create  5 – 15 minute training sessions for your team. Get their feedback on areas they feel they could improve.

2) Roll play. Practice those skills that make a difference with your customers, such as Asking customers for referrals, Presenting service maintenance menus, Upselling on a body shop estimate.
3) Discuss bottlenecks. Have employees tell you or send you a message on why they think their work slows down due to bottlenecks. Discuss solutions and engage all of your employees for their ideas. Do not disparage their input, or you will stifle their input.
4) Do your spring-cleaning now. Remove and dispose of clutter around the dealership. Sort and shred files (as allowed by the IRS.), scrap warranty parts (as authorized by your manufacturer.), or shred outdated forms.
5) Review every page of your website – do all departments shine? Call every phone number to verify they still connect to the right department.
6) Update employees’ job descriptions.

Everyone acknowledges the coronavirus crisis is an unprecedented time in our history, but we know it will pass. Heed the words of Zig Ziglar, “It’s not the situation, but whether we react negative or respond positive to the situation that is important.” Don’t let this gift of free time get away from you without making the best out of it.

If you would like a detailed list of projects, for each department, that you can do if business is slow, email me at profitblueprints@gmail.com or call Brooke at 877.316.7418.

Improve Dealership Cash Flow With Best Practices

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Every business faces unexpected events which can strain its bank balance; the trick is to be prepared for them.  Stop-sell orders could destroy your annual forecast for New and Used Sales.  A tornado or a hailstorm could put a dent in your vehicle sales and tie up cash while you wait for the insurance check.  You finally got (and paid for) all of those recall parts, now you have to find the time to install them.  A significant increase in the factory Customer rebates, along with an aggressive sales campaign, could boost your sales to the point where you are stretched for cash because your profits came from factory money and IT’S NOT HERE YET – but everyone wants to be paid—NOW!!  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!  On the last page of your Profit Blueprints© report, there is an analysis of key assets.  Not only do we track the monthly balance, but we put it into perspective by comparing the balances to the appropriate sales accounts.  The values highlighted in green show you how much cash, if any, is tied up in frozen assets.

Be familiar with the schedules and the accounts that concern your department to understand where cash could potentially be hiding.  The checklists on the following pages are for each department manager to make sure his or her accounts are always within target — and that processes are in place to keep the cash flowing.

SALES DEPARTMENT

VEHICLE INVENTORIES

  • Review the aging of your inventory; always be looking for “a sale” for the older vehicles. What are we doing to sell the five (or 10) oldest vehicles?
  • For new vehicle inventory, review the combination schedule that includes the inventory detail and the floor plan amount to confirm all vehicles are floor planned. For most dealerships, vehicles are floor planned.  If that is your policy, make sure dealer trades are either sold or floor planned promptly.
  • Look at your day’s supply of vehicles, either on the last page of your Profit Blueprints Report or on your own internal spreadsheet. Keep in mind handling costs and missing out on potential bargains are just two of the costs you pay if your inventory is too heavy.
  • Walk the lot; inspect the vehicles for faded stickers and cleanliness. Ask the question “if I were a potential customer, would this vehicle appeal to me?”  Don’t let “ugly” vehicles take up space and tie up your money.

Bottom-line: Don’t fall in love with a used vehicle and hope to sell it if it hasn’t sold after 45 days.
Sell it!  Free up the cash and move on to a better return on your investment.

 

RECEIVABLES

Confirm that you will be paid before you extend credit.  Review Receivables Schedules weekly and follow-up with past due amounts:

  • Customer deposits, full payments, and drafts.
  • Finance Contract Receivables.
  • Factory Rebates and Incentives. These could easily get out of hand or charged back if we have sloppy paperwork.  Clearly defined processes and continuous updates to staff will help collect and keep the factory money.
  • Finance Reserve Receivables. This should be reconciled when paid or the amount due is acknowledged by the finance source.  If there is a shortage, ask the finance manager to determine why and then adjust accordingly.
  • Service Contract/Programs Refunds. Any money you are expecting should be on a schedule.   When you refund a Customer, make sure you follow through and get your portion refunded also.

 

SALES PROCESSES

  • Move the deals from Finance to Accounting quickly. Eliminate bottlenecks and monitor pending deals daily.  The faster the deal gets to Accounting, the faster contracts are cashed; the faster the trade-ins are sold, the faster the cash gets to the bank.
  • Make the decision on trade-ins when the vehicle is brought into inventory. Retail or Wholesale – those are your choices.


SERVICE DEPARTMENT, BODY SHOP, and PARTS DEPARTMENT

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 but 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 days supply target, the excess will show in green.

Sublet Schedule – Service and Body Shop

There is nothing worse than 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 vehicle.

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!

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 performed 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© 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 supply.
  • Keep your eye on your stocking status and aging analysis from your Parts DMS Management Report. You could show the ideal days 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 means 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 wary 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 the proper processes and continuous monitoring, the bank account will be flush and, you can focus on selling more and controlling expenses.

If you’d like a cash flow analysis, call us at 877.316.7418.

 

Make Your Job Easier with Better, Faster Decision Making

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If you’ve watched any football game, you have to be in awe at the speed at which coaches decide what will be the next best play, based on the current circumstances. There are enormous variables that dictate the best play. Third down and seven yards may call for an entirely different play if you’re in the first quarter compared to the last two minutes of the game, and you are behind. Now are you behind by 3 points or 5 points? How close are you to the goal? The coaches have less than 25 seconds to analyze all of the variables to come up with the right play for the desired outcome.

Decades ago, exceptional coaches knew there had to be a better way than just going with their gut. Bill Walsh, Bill Parcells, and Jimmy Johnson figured out that if you knew ahead of time what the decision(s) should be in specific situations, you would be more successful. They “invented” the laminated sheets that every head football coach now carries with 1st Quarter plays already scripted, and situational decision plays “decided.” It is much easier discussing play options sitting at a table with unlimited time than making split-second decisions when the outcome of a game depends on choosing the right play while the crowds are screaming, your starter left injured, and you are trying to think clearly.

A good decision maker makes for a good Leader. Establish a decision-making process for common issues, and you can be more efficient in your day-to-day work. In any given week, Managers make hundreds of decisions; some easy, some critical. There are daily decisions that can be made quickly using an analytical approach when you follow a Decision Tree. Decision Trees are used to select the right strategy for a current situation and operate much like flow charts. If this – then do this, if that – then do this. When do we take a short deal versus passing on a deal?  To finish a Service Customer’s vehicle – do we special-order a part or do we pick it up locally to get the vehicle on the road sooner?  Decisions Trees, not only free up Manager’s time, they improve the consistency of your processes.

When applied to everyday choices, Decisions Trees will help your staff know what to do in specific situations – even when you’re not available.
The goal is not to take emotions out of the decision-making process, but to prevent emotions from taking over. Remember the old way you decided which used vehicles would make it to your lot – the Manager buying them because “he knows what sells in his market.” The myriad of tools available to help Managers stock inventory for their market and price their vehicles for their market insure Used Vehicle inventories that are right for your Dealership.

Our past experiences dictate the decisions we make and will influence the way we solve problems. When we apply what we’ve learned to make smart choices, we can continually adapt and improve our processes. Think about the decisions you make every day, can they be put into writing or flowcharts for you and your staff to follow the path that will yield the desired result quickly? It works in championship caliber football, and it can work for you.

For examples of Decision Trees email Brooke@profits4dealers.com

 

 

Yes, You Can Reduce Employee Turnover

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Employee turnover is a fact-of-life in any business. Employees retire, relocate, find a better job or are terminated for one of the several possible reasons. The costs of turnover are numerous. The direct costs of recruitment and training are the easiest to calculate; but the loss of Manager’s time, disruption of staff, reduced sales and losing Customers because of bad experiences could be where the biggest costs lie. There are different ways of calculating employee turnover, but the idea is to use the same method year over year and to work on reducing the turnover rate. After the W2s are printed is a good time to run the numbers to generate a baseline turnover rate for your Dealership.

To calculate your turnover rate: count the numbers of W2s of former employees and divide by the number of W2s of current employees. Multiply the answer by 100 to get a turnover rate that you can compare to other industries. The national average for private sector businesses is 42% according to NADA. In vehicle dealerships, one department is typically the biggest contributor to the turnover percentage: the sales department. While turnover is a big money waster and creates a customer retention problem, I have to give credit to Sales Managers for persevering in the efforts toward keeping a full staff and working on upgrading when possible.

After the financial collapse of 2009 and subsequent high unemployment rates, surprisingly an estimated 30 million people quit their jobs in 2014.
According to Forbes, some of the key reasons employees quit are, because:

You’re overloading your best people with more responsibilities.
After years of trimming staff; to get the same if not now more work done, your best people are asked to do the work of 2–3 people. Take a look at your top staff: do they have the opportunity to work on higher-level stuff, or are they expected to come in day-after-day and do the same old stuff just to keep up with the work?

You’re never around.  We say the most important time Managers can spend at their job is the face time with their employees and customers. If your employees can’t find you, how can you solve problems, and coach and motivate your staff?

You’re complacent with the caliber of your employees.
Good people want to work with good people, yet managers will let bozos keep their jobs; they’ll let tardy people keep their jobs, and they’ll let lazy people keep their jobs. It’s easier than taking the time to make better hiring choices, easier than confronting the inept, and easier than training people – that is, until the good people leave.

You’ve never given your people a sense of where they can go with their careers.
You may hold the job that you’ve always wanted, but what about your employees: have they reached their goals? Do you even know what their goals are? A career path is one way to show them how far they can go at your dealership, yet few managers have laid out a path for their staff. Take the time to understand your employees’ goals and what role you are playing in helping them reach those goals. They may not know what their ultimate goal is, but I’m sure they’d appreciate knowing you cared.

According to Indeed.com, the new normal for employment at one place is just under five years; and January is the month when most start looking for a new job. On-line job searches were up 40% from December to January. So now is a great time to work on employee retention before your employees have a “New Years Resolution” that includes finding a new job.

The best way to retain employees is to communicate with them. Conduct “Stay Interviews” and ask employees why they stay at your dealership, and then pay attention to what they like. Are they happy here? Are developmental needs being addressed? Are you recognizing and rewarding hard work?

Back to the turnover rate, just like any other measurable procedure, you can improve the numbers by setting goals, examining current processes, looking for ways to improve them, and implementing best practices. It will be worth your time to further break down the turnover analysis by examining how many employees either were terminated or quit within the first 90 days of employment. Understanding why this group of employees “didn’t make it” will aid in implementing processes to improve your retention numbers. If you conduct formal exit interviews, excellent! If not, get a list of folks who didn’t make the 90 days and call them to ask either why they quit or why they feel the job wasn’t a good fit (i.e., they got fired). This trove of information will help you on the right path for good employee retention.