Category: Trends & Insights

“Must-Dos” to Find Efficiencies in Even the Most Routine Tasks and Costs

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This article originally appeared in Digital Dealer here.

Back in August, we started our article series of “must-dos” by looking at the overwhelming weight of dealer expense structures on gross profit margins.

In Q1 2019, an average dealership’s expense structure was 106 percent of its gross profit, while in Q2 2019, it was 98.5 percent, according to data from NADA’s dealership financial profile series.

So, how did automotive dealerships fair overall last quarter? Marginally better. NADA’s Q3 data now puts the average dealership’s expense structure at 98.3 percent of gross profits. While we’re seeing movement in the right direction, the average dealership’s gross profit margin continues to fall below two percent, indicating there’s still a great deal of work to do to get costs down and profitability up.

Despite these findings, a small poll we conducted recently, suggests controllers remain optimistic about their dealership’s ability to generate profits. Results from the poll showed 50 percent of respondents reported they were confident in their dealership’s ability to generate profits today, while approximately 73 percent were confident in their ability to generate profits in the next two to three years.

Although we just captured a small pool of controllers with 26 respondents, the message seems as clear as the opportunity for dealers. The ones who handle the finances, the accounting, the general ledger, the “beans” themselves, feel positive about the direction their dealerships are heading in.

But with gross profit margins sitting where they are, how do you take action to maximize profitability? For the controllers we polled, increasing operational efficiency and reducing expenses rose to the top of the list. While these tactics can get accomplished in several ways, we recommend first doing a deep dive into the most commonly completed tasks and recurring costs at your dealership.

As the adage goes, what you do every day matters more than what you do once in a while. Because the DMS is the daily hub of your dealer operations, it’s a great place to begin mining for additional time and cost savings that will pay you dividends down the road.

To help you get started, we compiled the following list of tips and must-dos from controllers who have experienced firsthand the benefits of increasing efficiency in their daily dealership operations.

1) DO look for ways to automate or streamline repetitive tasks to help reduce non-value-added time. Eliminating non-value-added time has become a focal point for Joe Burris, corporate controller and chief accounting officer at Lou Fusz Automotive Network.

“I’m constantly looking for ways to automate or reduce non-value-added time across my dealer group when it comes to tasks and processes we do daily, such as billing, paying and processing vendor invoices, stocking vehicles, paying out warranty claims, and processing parts,” says Burris. “While I can’t control sales volume or gross profit, I can control my costs, including ones I’m responsible for to positively impact profits.”

2) DO give your staff a platform to voice their suggestions. While keeping a close eye on industry benchmarks and data is crucial, Burris urges that the most effective way to find wasted dollars is by looking through the lens of your team. Observe your staff and talk to them about their day-to-day jobs and processes. “By listening to their suggestions and ideas, you can find new and improved ways to do more with less,” Burris notes. Make sure to reward those individuals who offer recommendations and actively participate in the process of improving and streamlining dealership operations.

3) DO divide big quarterly or annual tasks into smaller weekly or even daily items. Breaking down the quarterly or annual tasks into smaller, more digestible ‘to-do’ items is key for Lori Garrison, the controller at Huffines Auto Group. “This not only saves you from being overwhelmed at crunch time but also makes it easier to find and correct problems/errors before they get worse or cause your dealership penalties,” notes Garrison.

With account payables, there are hundreds of vendors to keep tabs on. To tackle this, Garrison maintains a spreadsheet tracking the dates and amounts with each payment made, which helps her to easily spot anything outstanding or incorrect. Garrison also reconciles every day. “Whether it’s last in, first out reports or payroll accruals, there are a million things that can go wrong in a week and a billion that can go wrong in a month. If I reconcile every day, it’s easier to find and resolve issues and I sleep much better at night,” she explains.

4) DO use technology to your advantage. Garrison uses the general ledger import function for everything. “I tell my team that if it’s more than three lines of information, import it, don’t rely on rekeying the data. It’s faster and creates less room for error,” she notes. “There are so many helpful tools and features in our DMS that I try not to do anything by hand anymore. The same goes for stocking in inventory. We pre-stock vehicles into the system using our OEM invoices. We keep them marked as ‘in-transit’ until they physically arrive, but we get them all set up ahead of time.”

5) DO keep a close watch on your managed accounts. Lisa Feagin, the controller at Tom Bush Family of Dealerships, suggests checking each managed account at least three times a week to ensure contracts are being funded and departments with different P&Ls are splitting funds properly. She uses a combination of financial reports from her DMS to visually scan for abnormal amounts or duplicate entries and trains her finance managers and bookkeepers to study trend reports across the new, used, parts, and service departments weekly.

6) DO stay proactive even when your business is in a good place. “Dealers can’t get complacent when things are good,” cautions Feagin. “We’ve had a fairly strong growth year, and it’s easy to let expenses get out of hand if you loosen the controls.” To stay ahead, Feagin closely monitors expenses by cross-indexing them against volume. Did employee overtime and staff hiring go up to accommodate higher volume? Was that necessary? What about tools and supplies? Are rising costs due to price increases or a result of waste or misuse?

Stay tuned for more “must-dos” to keep your dealership running efficiently all year long.

About the Authors
Susan Moll is Senior Director of DMS Field Services for Cox Automotive, and Matt Hurst is Senior Director of Client Services for Dealertrack DMS.

This article originally appeared in Digital Dealer here.

Beyond The Contract

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Finding the right technology partner for your dealership takes more than a solid contract or a good deal to secure your trust. When it comes to choosing the right Dealer Management System (DMS), you deserve a partner, not just another provider. Here’s what you should expect from your DMS partner when you go beyond the contract.

Discover more from your technology investment

Signing a contract can feel like a serious investment—and it is. Yet, often for dealers, before the ink is dry, the relationship between your DMS provider is out of sight and out of mind. A truly vested partnership should help you and your team uncover the true value of your technology investment. Learning a new system has the potential to help your team uncover more productive process improvements, learn new ways of analyzing data, and change the way your business operates.

Partnering with true experts

Getting advice from your vendors in the past has probably felt like a sales pitch. And those “trusted experts” have probably had their own sales goals to meet. What if your new DMS partner came with a team of industry pros, with real field experience, who had your goals, values, and aspirations in mind? Partnering with Performance Managers is like having a trusted advocate in your corner to help level-up your goal-setting game. After all, when our partners do well, it makes everyone look good.

Trust and transparency are the new customer service model

Your dealership goes a long way to deliver top notch customer service to your buyers. So you’d expect nothing less from your partners, right? Then why do so many dealerships tolerate customer service that fails to meet the needs of their team before, during, and (especially) after a technology transition? With the introduction of DMS 360, our DMS users have access to an online community of peers for faster problem-solving that delivers a new level of transparency.

Choosing a new DMS is the first step, but discovering a true partner who can help ease the pain of a transition to your new, improved DMS and deliver better customer service is the future of dealership technology. Learn from real-world dealers, like you, who have made the transition by watching the video below.

 

Watch now >>

 

FUEL DEALERSHIP GROWTH BY MEASURING THE RIGHT KPIs

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Is more data always better when it comes to financial reporting? While dealerships certainly want visibility into what is happening in their operations every month, amassing lots of data points from every department is fruitless if you don’t know which numbers matter the most.

Often, dealerships try to diagnose what’s happening within their business by implementing custom report builders that are not built for the specific needs of the vehicle sales and service industry. These builders require the assistance of outside programmers to build and customize the solution, ongoing maintenance to keep up with changes introduced during software upgrades and patches, and alterations as business operations evolve.

After all that effort, most dealerships end up running the same set of reports every month, but they may not be using them to uncover opportunities for improvement that can make a real difference for the success of the business.

A better approach to financial reporting focuses on specific key performance indicators (KPIs) that can guide dealerships toward improved operations and profitability. The first step is gaining an understanding of which KPIs enable critical analysis of financial results, and how to uncover improvement opportunities in the findings.

Less work, more value

For dealers, the ideal financial reporting solution would do most of the heavy lifting to enable meaningful analysis of data by providing dashboards and reports that offer a holistic view of information from multiple departments across all stores. Managers would be able to drill down into data as needed to explore operations from multiple perspectives without chasing down input from every store.

To get accurate views of how new vehicle, used vehicle, and service and parts departments contribute to the profitability of the business, dealers need:

● Flexible reporting modules for every department in the store
● A view of data across all dealerships in a dealer group
● The ability to easily filter, group, and segment the data with a few clicks to answer any question
● A clear understanding of the KPIs that matter to the critical analysis of how the business is performing

The KPIs that matter

Every dealership is striving to increase gross profit by maximizing revenues and controlling expenses. While there are lots of things to measure and monitor throughout each department, there are three essential KPIs that every dealer should evaluate regularly. Effectively managing these reports can immediately drive better results for the overall success of the business.

1. Contracts in Transit
The faster dealers can move assets to cash, the healthier the dealership. Karli DeVall, a corporate controller for Tim Dahle & Red Rock Auto Groups, knows how important cash flow is for her business.

“It’s all about the cash for me,” said DeVall. “I want to be able to measure contracts in transit and get the average days delivery to cash, not just for the store, but for specific finance managers, lenders, and sales managers, so we can figure out who is delaying the process.”

DeVall wants to be able to assess KPIs on a weekly and monthly basis to measure how teams are progressing.

“If the executive team is only talking about performance every six months, it’s hard to move the needle,” said DeVall.

2. Sales to Accounting Reconciliation
Current reporting options generally only provide controllers with access to what’s happening in the finance office and accounting in separate reports that are generated from different parts of the DMS. The results rarely, if ever, match. The monthly process of reconciling every posted vehicle deal requires a time-consuming manual audit to determine if there are reporting discrepancies.

A better approach is to see all deals in one report that lists information from both departments as well as any differences.

For example, imagine a dealer has 18 deals on the books but has a discrepancy between the gross in the business office of $60,000 and the gross in the accounting records of $74,000. Currently, figuring out which deals are still hanging, and why, requires a lot of manual investigation.

A holistic view of every deal (including capped and uncapped deals) reveals the status of deals with banks, chargebacks, and other issues that can hold up finalization. With that information, F&I managers can take action to fix discrepancies, push financing decisions, and finalize every deal in a fraction of the time.

A clear view of deal flow also enables analysis of the performance of individual F&I managers in terms of cash collection. This data can be used to inspire competition between managers, increase efficiency, and close performance gaps by enabling informed coaching conversations.

3. Income Statement
For dealerships that operate multiple stores, providing the ability to map each individual chart of accounts to a standard, holistic view of the performance of the entire auto group enables critical financial analysis.

The process should be automated so managers and controllers have access to the information as soon as the books close. Without an in-depth reporting tool, dealers burn a lot of time putting each individual store’s report into one consolidated Excel sheet. Custom segmentation of data, for comparing metrics of smaller subsets of the overall group, can take days to configure.

For example, to get a consolidated view of what’s happening in her auto group, DeVall must pull data together manually from multiple general ledgers, as well as the business office, and inventory reports — and then spend a considerable amount of time formatting the results to make them usable and presentable.

She observed that it would be valuable to be able to easily group data however she wants, so she could figure out group performance and provide actionable recommendations based on KPIs. For example, how are the Nissan dealerships in the group performing? How can we compare high-volume stores on an equal standard with lower-volume stores? What data can we provide for managers to drive next month’s performance?

“When you set goals and then give managers the information they need to track those goals and be accountable, all of a sudden people start moving and things get progressively better than when you weren’t talking about them,” said DeVall.

Finding the right balance

These three KPIs are the starting point for the types of data dealerships should track when implementing a better approach to financial reporting. It’s a smart way to identify and narrow the data that’s valuable, from the entire universe of a dealership’s operations.

Want to learn more? Click here to download key takeaways from our on-demand webinar, “Mastering the Art of Data-driven Practices,” to learn more about the steps that can help you maximize the power of your data for improved results.

“Must-Dos” to Equip Your Dealership for Today’s Tech-Centric Workforce

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This article originally appeared on Digital dealer here.

By Susan Moll & Matt Hurst

While Halloween is known for bringing a month of frights, constant employee turnover haunts dealership efficiency all year long. According to the 2019 Cox Automotive Dealership Staffing Study, approximately 20 percent of dealership staff are likely to look for another job in the next six months. On top of this, NADA’s 2018 Dealership Workforce Study found dealership turnover reached a new high of 46 percent last year. So, how can dealerships reverse this damaging trend? Well, it all starts with taking stock of the changing talent pool.

A younger generation is entering the workforce and bringing with them a greater interest in dealership jobs than older generations, opening dealerships up to a new audience with a fresh point of view. Among Gen Z and Young Millennials, more than 30 percent are interested in working for a dealership, according to the 2019 Cox Automotive Dealership Staffing Study. This rate was even higher when roles other than sales were presented to them. However, appealing to this audience requires a cultural and technological shift.

Just as car buyer needs evolve, so do those of your employees. Here’s a list of “must-dos” to attract and retain this younger, tech-savvy talent and meet their changing needs head-on.

DO foster an environment that makes employees feel valued and show them there is an opportunity for future growth.

For Jennica Krebsbach, controller of Van Horn Automotive Group, creating a collaborative and engaging culture has been critical to her dealer group’s success. From instituting more flexible work hours to investing in training programs that help employees grow their careers and rise through the ranks, Van Horn understands employee satisfaction is vital to customer satisfaction.The auto group recently reimagined their on-boarding process for their sales staff to now require new hires to spend a week off-site to learn how to effectively communicate with customers, talk through word tracks, and gain a better understanding of what the sales process looks like. In addition to this, Van Horn also offers an advancement program, which is for anyone who wants to reach the next step in their career, whether as a finance manager, sales manager, etc. At Dealertrack DMS, we use individual development plans, which can be easily adopted in a dealership environment too.

DO engage your employees and ensure everyone feels like they have a say in the future of the business.

“We are 550 employees strong, so to keep everyone motivated and on the same page, communication and transparency are key,” Jennica notes. This perspective is also why Van Horn employees currently own approximately 30 percent of the dealer group and why town hall meetings occur the second week of every month. It’s all about making employees feel like they have a voice and a stake in the dealership and its success.

DO perform intermittent talent audits and “stay” interviews rather than just exit interviews.

A talent audit will help you review your workforce engagement strategy and address any needs for a specific skill set. Meanwhile, interviewing employees about why they choose to stay at your dealership and what improvements they would like to see, offers a unique point of view that’s hard to get from an exit interview.

DO evaluate the efficiency and simplicity of your dealership’s technology.

For Gen Z and young millennials, technology is more than a tool, it’s who they are, how they work, play, and communicate. These younger generations expect dealerships to equip them with the digital tools necessary to work more effectively and efficiently. That’s why leveraging a modern, open, and easy-to-use DMS system, along with a dedicated technology partner is a must-do. Plus, by not being locked into a rigid platform, dealerships have the flexibility of hiring to fill business needs rather than cater to the needs of their technology choice.

DO highlight training opportunities that are tech-centric.

Faced with the weight of high staff turnover, having intuitive technology and a provider that offers ongoing training opportunities and support is critical to bring greater productivity and speed to the new hire on-boarding process. Look to your technology provider for digital training functionalities and ask about access to peer-to-peer forums, self-service support, and virtual training and webinars.

A new, younger generation of workers is out there, and many are interested in dealership jobs. It’s time to take a look at your current technology and talent strategy to see if they make sense for the needs of today’s consumers and a changing workforce.

(Stay tuned for more, as this is part III in a monthly series of must-dos to keep your dealership running efficiently all year long.)

About the Authors

Susan Moll, Senior Director of DMS Field Services, Cox Automotive.

Matt Hurst, Senior Director of Tech Client Support, Dealertrack DMS.

This article originally appeared on Digital dealer here.

PAYROLL: DISCOVER THE COMPETITIVE ADVANTAGE HIDDEN IN YOUR BIGGEST EXPENSE

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Dealership managers are laser-focused on procuring vehicles and parts inventories with margins in mind. Marketing campaigns are carefully scrutinized to make sure every dollar produces results. Yet, dealerships’ largest operational cost – payroll – is often thought of as a “necessary evil” and gets little attention. As long as checks get cut on time, everything is OK, right?

Not necessarily.

Payroll can account for an average of 60% of a dealership’s total expenses.¹Payroll systems are typically viewed as simply a way for the human resources (HR) team to administer employee compensation. Some rely on outdated spreadsheets to manage the process. Others wrestle with large enterprise-level systems that have too many bells and whistles and not enough auto-industry-specific features.

What many dealers do not see is the opportunity hiding in payroll and benefits management to create competitive advantages by streamlining inefficient processes, realigning human resources to focus on talent retention, and reducing compliance risk.

Payroll can account for an average of 60% of a dealership’s total expenses.

Breaking the Stereotype

It’s no secret that dealerships struggle to hire and retain qualified employees. In a market where unemployment is low, the pool of candidates is already limited. Plus, a Hireology / Cox Automotive study reveals that only about one in 100 people would consider working for a dealership because of their perceptions of what it’s like to work in the industry.²

The only way to solve the issue it to address it head-on. Dealers develop strategic plans to manage margin compression, customer loyalty, and F&I efficiencies by leveraging data from their dealership management system (DMS). Now it’s time to use the same approach to improve employee relations.

By integrating the DMS with the HR management system, dealers get more accurate visibility into how employees are compensated, with which they can make better long-term decisions.

And the payroll process is greatly simplified, freeing the human resources team to focus more on culture-building initiatives that appeal to current employees and potential recruits.

Building a Competitive Advantage

The automotive industry is evolving along with changing market forces. Younger generations are less interested in commission structures and want the comfort of pay stability, benefits, and work-life balance. Dealerships seek ways to respond that address these desires that workers can find in other industries, but still motivate employees to meet sales and service quotas. It’s a fine line.

Integrating the HR system with the DMS can help find a balance that works for dealership management and team members while creating a competitive advantage in the following areas:

Streamline operational expenses and tasks
Most human resources teams pull double duty entering data about commission plans / pay structures, schedules, time off, tax withholding, and other key data into multiple systems. It’s a never-ending, time-consuming process that is prone to error. The American Payroll Association estimates an error rate of 1–8% of gross payroll.³

Dealer managers usually have little visibility into how the process is managed because they rightfully rely on comptrollers or payroll management personnel to handle the function.

The integration of the DMS with the HR system streamlines how data about sales is filtered into the commission equation, minimizing the impact of human error from duplicate data entry.

Overall visibility into employee management is improved, enabling managers from multiple teams to more easily pinpoint operational inefficiencies by assessing metrics that are valuable to them. For example, sales managers can see which team members are nearing overtime. HR leaders can evaluate what benefits are not being used and adjust plans. General managers can see trends in turnover based on a number of factors such as role, manager, and commission structure.

Also, it’s not uncommon to hear horror stories from payroll managers about the excessive amount of time it takes to process checks every two weeks. Many note they spend 60–75% of their time every month just making sure payroll is accurate and issued on time.

HR systems that are integrated with the DMS can greatly reduce the amount of time spent on processing payroll and managing benefits. The HR team can then shift their focus to creating much-needed employee engagement programs.

For example, the Kingman Honda dealership in Kingman, Arizona, reports recouping about one day worth of work every week after switching to another DMS. The efficiencies come from more straightforward car deal posting processes and bank reconciliation, easier accounts payable, simplified cashiering, and faster, more direct vehicle stock-in processes. Essentially, updating data in one system automatically syncs data with other systems such as payroll.

Boost talent retention
Employees want to feel like they are in control of their careers. Dealerships that proactively address talent retention are more likely to see better overall results because employees are satisfied, motivated, and understand what is expected of them.

The integration of the HR system with the DMS enables dealerships to provide transparent views into their schedules, compensation structures, and benefits from personalized dashboards that they can log in to and view. Managers and employees have access to the same information and can have open conversations based on data if questions or discrepancies arise.

These types of solutions are commonplace in other industries where companies compete for qualified candidates. New employees will expect technology-enabled onboarding, the ability to check their benefit status online and a user-friendly interface for HR-related tasks. Dealerships need to provide this type of solution for employees to stay current with workplace trends.

Accurate performance and compensation data is also a valuable tool for managers to review and proactively facilitate conversations with employees about what’s going well and areas for improvement. It’s an opportunity to shift the culture to a spirit of coaching and feedback.

Reduce compliance risk
Are you 100% confident your payroll system is 100% accurate all the time? If not, you have a compliance risk. Keeping up with constantly changing state and federal regulations is challenging. Dealerships are open to steep fines or lawsuits, even for what may seem like simple mistakes.

The probability is so high that many dealerships keep a law firm on retainer just in case compliance issues arise.

By integrating the DMS with the HR system, you eliminate the need to manually track compliance updates. An integrated talent management solution automatically populates the relevant modules with updated information such as tax compliance, minimum wage, overtime regulations, equal employment opportunity compliance, employee verification, and other important compliance directives.

Get More Information
When so much of your capital is invested in people, shouldn’t you be 100% confident that the systems used to manage payroll and benefits are accurate, streamline processes, and provide insights that enable the dealership to build a competitive advantage?

To learn more about strategies for recruitment and retention, read “8 Keys For Hiring & Retaining Staff at Dealerships.”

1. NADA. “NADA Data Annual Financial Profile of America’s Franchised New-car Dealerships.” 2018.
2. Hireology. “Cox Automotive Dealership Staffing Study.” 2017.
3. Katz, Eyal. “Payroll Errors That Cost You Money and How to Fix Them.” Business 2 Community, 2017.

Ask Better Questions. Get More From Your DMS.

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Have you ever heard the phrase, “There are no stupid questions?” Of course you have. Yet a fly on the wall of any corporate business meeting will tell you that, certainly, it would seem the people in the room are afraid of proving that statement wrong. In a Harvard Business Review poll, readers estimated 70-80% of their children’s dialogue was comprised of questions. (Anyone with small children is likely not surprised.) Yet, by the time we grow up, those same readers estimate their inquisitiveness drops as low as 15%. So, what happened?

Does everyone at your dealership have all the answers? Do you fully understand the scope of implementing a brand new Dealer Management System into multiple dealership locations? Odds are, no. Yet, knowing which questions to ask can be difficult. Here are three reasons why you, and your entire team, should get together more often and start asking…”why?”

Having a Growth Mindset

About 40 years ago, a Stanford University Psychologist named Carol Dweck uncovered the science behind the growth mindset. Now, businesses like Microsoft are famously adopting the principles defined in this research to unlock hidden potential in their teams. By removing the fear behind failure, employees and organizations are driving higher innovation, reaching their goals, and pursuing bigger projects. Research shows that it’s worked for very large enterprises. Is your dealership ready to ask more questions, even if you don’t have all the answers?

Becoming a Better Leader

Making a technology switch is a big deal. Months of planning can suddenly grind to a halt when things go wrong. Although “resistance to change” is often cited as a major delay in a technology switch, people will always look toward leadership to guide a technology transition smoothly. In other words: It starts at the top. The CEO of Google, Eric Schmidt is quoted, “We run this company on questions, not answers.” Having an open forum where you and your team can freely discuss the unknowns can keep everyone in learning mode and help you become a better leader, according to professional development experts. Make sure your door is open and your dealership is a safe space for questions about any changes.

Discovering the Unknown

It’s tempting to ask safe questions and end each day with definitive answers. Yet, collaborating with your team leads and asking the right questions—more questions—is a start in the right direction. “How will this impact our work load?” “Will we lose our data?” “Who will own this project?” Sometimes, knowing what you don’t know can help you discover the important steps you’ll need to take before you make the next move. It can also help you identify roles and responsibilities your internal team will need to assign, as well as uncover the gaps your potential vendors should support. To get started, get your copy of the DMS Checklist here.

 

Begin your journey by asking the right questions. Get the DMS Checklist.

Revealed: The Missing Metrics Needed To Fight Margin Compression

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Sell more, make more.

The formula for dealership profits used to be pretty straightforward. Managers that focused on increasing sales volumes could logically expect to see higher profits. Times have changed. According to a recent report from the National Automobile Dealers Association (NADA), for the first time in a decade dealerships on average experienced operational losses.* The culprit: margin compression.

Scouring the Daily Operating Control (DOC) and other financial reports for answers about where to cut costs is a start. But it’s likely that key metrics that affect margins are not included. Dealerships need to expand what data points they incorporate in their analyses of financial performance to uncover the root causes of margin compression.

Managers are better able to make strategic, data-driven decisions by adding metrics from these key areas:

Expenses
Keeping track of operating expenses such as advertising and headcount is a standard accounting practice. Giving meaning to those figures requires benchmarks that can be tracked and analyzed. According to Mandi Fang, vice president and general manager of Dealertrack DMS, the most effective way to uncover the impact of expenses on gross profit is to automatically generate trend reports from the dealership management system (DMS).

“To really get the perspective you need to take action from this data, compare your performance against the benchmarks month over month to understand where you can do more with fewer resources,” said Fang.

Marketing and advertising expenses are also an area where a fresh look can pay dividends. The first step is to take a deeper dive into the existing customer database.

Instead of spending on broad-based campaigns to carpet the potential market, it makes sense to target specific customers who are ready to replace their current vehicles and already have an affinity for the dealership.

Inventory and Asset Aging
The amount of time vehicles sit at a dealership affects cash flow. Fang recommends creating a weekly inventory age report that highlights the top 10 most-aged assets. Look for trends to identify why the vehicles are not moving, such as price sensitivity, upgrade packages, or other contributing factors.

“Most dealers are amazed at what they find with vehicles sitting on a lot for months and excessive warranty claims,” observed Fang. “Using the weekly report to hold department heads accountable to investigate aged assets can bring major gains to your operational efficiency.”

In an interview with CBT News, Dale Pollak, executive vice president at Cox Automotive and founder of vAuto, notes, “Something’s happened in the last two years that I know objectively and empirically to be true … an average vehicle loses its ability to make a positive return on investment [at] somewhere between 30 to 40 days.”**

According to Pollak, up to one-third of a dealer’s new and used vehicle inventory is typically over-age, which ties up capital that could be reinvested in more profitable units. He recommends making “investment-minded” inventory decisions for new and used vehicles based on retail prospects. Then focus on quickly getting vehicles ready for retail to reduce holding costs and improve front-end gross potential.

If used cars are not turning efficiently, it is important to analyze relevant data points such as appraisals, recon costs, pricing, and time to market to determine opportunities for improvement.

Fixed Operations
About half of a dealership’s profits are usually generated from fixed operations. As margins on new and used vehicles fall, the service and parts departments can be a way to make up lost revenue. The main factor affecting profitability is the ability to maintain consistent, efficient utilization of resources.

Kevin LeSage, director of digital marketing for Autotrader, recommends verifying the accuracy of data used to track productivity in the service center to get an accurate view of where to make improvements. For example, the benchmark at most dealerships for technician productivity is 90–95%. If something looks off in performance metrics, verify that sound processes are in place to capture data.

“Technician productivity has more to do with the shop’s loading and scheduling than it has to do with the technician’s ability or performance,” noted LeSage. “Having an accurate understanding of your technician productivity rate can help you realistically assess their bandwidth and capacity for additional work or figure out what tasks that are draining their efficiency can be reassigned.”

Service departments often measure capacity by the number of scheduled appointments. A better metric is evaluating in a week what hours the shop is open, the aggregate staffing hours of service technicians and average time allotment per service type. Then you can realistically evaluate the team’s bandwidth to set goals for the number of services performed every week.

With targets in place for services performed per week, marketing activities can be created to support demand generation. For example, to increase the number of oil changes, series of email blasts featuring promotional offers and links to an online scheduling tool can help boost appointments.

An audit of the service technician dispatch process can also uncover opportunities to maximize the return on each appointment by ensuring lower-level maintenance items, such as oil changes, are not handled by senior-level staff.

Inspection rates are another metric that can drive higher profits. Are service technicians upselling appropriate additional service requests (ASRs)? You won’t know unless you have benchmarks in place to assess results. Additional training and expectation-setting may be all it takes to boost follow-up appointments.

F&I Sales
Tracking the health of F&I sales can uncover opportunities to improve revenue. Metrics to analyze include the average transaction amount, product penetration, product index (number of products per deal), and profit per vehicle retailed (PVR).

According to Tony Troussov, a seasoned automotive industry expert who focuses on the importance of F&I sales, dealerships retain about 70 to 80 cents of every dollar generated through F&I.

“Focus has shifted to improving (F&I) in the wake of margin compression,” said Troussov. “Now there’s a lot more discipline and dealerships are paying attention to the numbers.”

He recommends engaging the F&I team to assess customers’ buying habits and trends, including previous deals and service histories on trade-ins, to craft strategies to overcome customer objections.

Evaluating how F&I options are presented to customers can also reveal ways to boost sales. Instead of offering one item at a time in sequence, bundling F&I products into three or four packages from which customers can select simplifies the sales process and boosts product index metrics.

Final Thoughts
Incorporating these missing metrics into the assessment of dealerships’ margin compression issues is just a starting point. The new and used vehicle market is volatile. Monitoring and reacting daily to real-time data is necessary to hold teams accountable for their performance. Setting benchmarks and using collected data to drive strategic decisions is the best course to mitigate issues and improve margins.

Want to learn more? Click here to download the eBook “7 Solution to Margin Compression: Strategies for Preserving Dealership Profit Margin.” You’ll get an in-depth look at margin compression and steps dealerships can take to combat the problem.

* Lutz, Hannah. “Auto dealers losing money on operations, NADA says.” Automotive News, 2019.
** CBT News. “The Most Effective Way to Reduce Margin Compression at Your Dealership – Dale Pollak, vAuto.” 2019.

Key Takeaways: Data-driven Practices For Your Dealership

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Leverage data-driven practices with these important tips to make your dealership more profitable.

Data is everywhere in your dealership. Knowing what to do with it and using it to become successful can be overwhelming. Your dealership won’t become a data-focused institution overnight as it takes a real mindshift, from leadership-led initiatives down to the showroom floor, to make it a reality. But, with practice, it is possible to instill the right mindset, practices, and focus to achieve it.

In our recent Auto News webinar, Vice President and General Manager of Dealertrack DMS, Mandi Fang, and Director of Digital Marketing from Autotrader US, Kevin LeSage, shared tips for mastering the art of data-driven practices.

The Data-Driven Culture

Fostering a business that embraces data is the first, and most crucial, step for dealerships. If you don’t have the right mindset, any technology, any amount of training, and certainly your vendor relationships, will not help you achieve your goals. You have to be certain your team is aligned to the following key drivers in order to build a data-driven culture:

Slide: Define Your Objectives
Define Your Objectives

Don’t create objectives based only the data you think you can get from the tools you use, but rather focus on the top 3-5 things you want measure in order to drive different results.

Define the Right People, Processes, Tools

Look at the data that you already have and find out which data sources provide the most valuable information. This will help you hone in on the data you should be looking at and weed out the extra noise.

Next you’ll need to define a process for calculating each KPI, then assigning ownership of each KPI, and finally establishing a regular cadence for updates.

Measure, Monitor, Manage

You must consistently measure and monitor your progress to make sure the data being collected is leading you down the right path and ensure nothing is standing in the way of success.

Download the PDF: Key Takeaways: Mastering the Art of Data-driven Practices

Better Focus. Better Results.

When your dealership is able to turn data into insights, prepare for the “magic” to happen. It’s no secret that people proficient in data technology get excited about the results. That’s because data has the tremendous potential to drive success for your business. Once you’re ready to roll, here are three top areas to focus, first.

Accounting

Accurate, real-time data provided by your DMS is not only important for creating a picture of the past – but provides the framework for your accounting team to deliver process-optimizing financial data relevant to your dealership’s future.

It’s so important for dealers to start digitizing their Accounting functions in order to remain competitive. The right DMS is the foundation for automating and streamlining inefficient processes.

Fixed Ops

Dealers are starting to shift their focus to finding ways to drive more sales through fixed ops since it’s such a major driver of profit for your dealership. Around half of a dealership’s profit comes through fixed operations. Tracking KPI’s is a great way to maintain peak efficiency as long as your Fixed Ops team is onboard to do it.

Digital Marketing

While Digital Marketing is a very broad topic, dealers can start by focusing first on two main areas:

  • Traffic Scoring – monitoring the engagement or the quality of each and every visit that you’re driving to your dealership’s website.
  • Personalization – leveraging data to create custom experiences for customers who visit your website.

Adopting a data-driven approach can lead to greater success for your dealership. While this may seem obvious, the path to profitability can be confusing. Knowing how and where to begin takes experience and guidance. Start here with tips from the experts. Watch the full webinar and download the PDF for Key Takeaways.

Get the PDF: Key Takeaways: Mastering the Art of Data-Driven Practices

 

The Path to Data-driven Practices Starts With People

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Data is everywhere in your dealership. You have access to cold, hard facts about every aspect of operations, from profit margins to customer demographics to the average time of service visits. You know you should be putting all that data to work to drive business decisions, but figuring out where to start can be overwhelming.

The benefits of adopting — and consistently managing — data-driven practices are compelling. Dealerships that have figured out how to collect and extract meaning from their data sources have a competitive advantage. They use the insights found in the data to boost profits, improve operational efficiency, generate more sales revenue, and create transparency across all departments.

Unfortunately, you can’t just walk in one morning and declare, “We are now a data-driven organization,” and expect results. The transition requires the cultivation of a culture that understands and values how data can positively impact the business. Until you get team members on board, nothing will change.

I’ve Got a Feeling

Change is a pretty scary word for most people. Introduction of new, data-driven practices can feel threatening to team members who may be resistant to learning new systems or changing their work habits. If things are going well the way they are, why make changes?

It’s a common sentiment. Even though there is more data available than ever before, 39% of organizations say that making decisions based on gut feeling or experience is good enough.*

Part of cultivating a culture that thrives on using data to make strategic decisions is recognizing the emotional aspect of embracing analytics. Help team members understand how data is just another tool the dealership can use to improve operations. While their job responsibilities may change a bit, they will now have the resources to make a real impact on the success of the dealership.

According to Mandi Fang, vice president and general manager of Dealertrack DMS, organizations that are able to successfully create and execute data-driven cultures demonstrate how collaboration across the entire dealership shapes decisions at the management level.

“Remember to share your progress, including your successes and the areas you’re still working on, with your employees across all levels on a regular basis,” said Fang. “It can be a difficult transition, but consistency is key.”

Consistency Over Time

To make lasting change happen, you have to be vigilant. Only 37% of organizations that pledged to become more data-driven have successfully met that goal.** Organizations that stay the course ultimately provide better experiences for their customers because they are better attuned to market demands.

Team members need to see how their work is utilized by the management team to drive decisions. Make sure everyone across all levels understands the value of each metric that is monitored and how it supports the goals of the dealership. Communicating expectations openly with the entire team on a regular basis and explaining how individual contributions combine into larger analytical models can inspire long-term commitment to the effort.

Experience is valuable, but by motivating your team to inform their expertise with data, your dealership will get better results.

Steps to Becoming a More Data-driven Dealership

Now it’s time to get started. Just having access to data doesn’t equate to insights. To successfully implement data-driven practices, you need to follow three key steps:

1. Define your business objectives

Fang recommends developing a one-page document that summarizes your mission, vision, and objectives to clarify why you are seeking to become a data-driven dealership. What are your short- and long- term goals? Looking to boost sales revenue? Need to tighten operational costs to combat shrinking profit margins? Expand your objective beyond what data you think you can get from your tools.

Narrowing the scope of what you want to accomplish is the first step to setting goals that are realistic and actionable. Prioritize three to five measurements that will drive results for your organization.

Slow and steady wins the race. Start with the item that is likely to have the most positive impact, then continue to move down your list and implement the remaining objectives over time.

2. Identify the right process, people, and tools to execute the plan

Identify actionable key performance indicators (KPIs) and metrics to support the identified business objectives. Analyze current data sources for the most pertinent information. Consider if there is data missing that would be useful to answer key questions. Weed out data that does not support business goals.

Then define a process to calculate each KPI and track each metric, including assigning team roles, establishing the frequency of readouts, and outlining what needs monitoring along the way. Typically, the heads of each department are accountable to track metrics, relying on members within their team to manage the data and follow good practices to ensure the validity of reporting.

Finally, implement the right tools to configure, collect, and visualize the data. Automating the process as much as possible is critical to ensure accuracy and consistency of reporting.

“Within my leadership team, we created a set of 10 KPIs to measure ourselves and the performance of the business,” said Fang. “With some of the KPIs, we discovered we didn’t have one tool or system that can easily provide the data we need, so we continue to work toward automating the process still today.”

3. Measure, monitor, and manage

Doing the upfront work to foster a culture that thrives on data-driven practices pays off in step three. If team members are advocates for the process of collecting and analyzing data and see value in the results of their work, you will continue to get the insights you need to drive strategic decision-making.

“People don’t do what you expect, but rather what you inspect,” observed Fang. “Getting started is only half the battle.”

It is also important to monitor progress on a regular basis and make adjustments as needed. For example, if different departments are using separate systems, the manual process of connecting data inputs may be too time-consuming. Upgrading the technology infrastructure may be required. Solicit input from team members and respond by removing roadblocks or adapting processes to stay current.

The Road to Success Is Paved With Data

Becoming a dealership that succeeds with data-driven practices is challenging, but the rewards are worthwhile. The process begins with the cultivation of a culture that motivates team members to embrace the value of data and willingly contribute in new ways. With a clear picture of business goals, measurable KPIs can be established and championed across the organization.

Want to learn more? Click here for the “Mastering the Art of Data-driven Practices” webinar. You’ll discover ways you can leverage data for more profitable dealership operations across fixed ops, accounting, sales, and digital marketing.

*BARC Institute, 2014 Information Culture Study.
**NewVantage Partners, Big Data Executive Survey, 2017.

Must-Dos to Score an A+ on Your Dealership’s Month-End Processes

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This article originally appeared on Digital Dealer here.

By Susan Moll and Matt Hurst

Can you hear the pencils sharpening, expo markers squeaking, and fresh new backpacks zipping? While it’s back-to-school season across the nation, at the dealership, September is also a great time to start anew by giving your strategy a refresh, beginning with your approach to month-end processes.

Whether you sell 10 or 100 cars per month, you should always take a step back to grade your month-end approach to ensure you’re setting yourself up for success. Are you maximizing efficiency, or do you feel like every month is a scramble to close out? Is your DMS provider helping to ease the process and streamline the workflow for you, or are they making it more difficult? What’s working well and what’s holding you back? Are you accounting for all of your sales and expenses?

It’s a lot to consider, which is why we recently connected with Karli DeVall, CFO of Tim Dahle & Red Rock Auto Groups and former automotive accounting consultant, to help put together some of the must-dos to make sure you ace your next “month-end report card.”

Create a Checklist

For Karli, who has worked with dealerships of all different shapes and sizes, the number one must-do heading into month-end closing is to create a checklist. Your checklist should outline the tasks that need to get accomplished on each of the four key days associated with month-end closing (usually the first four days of the following month). If you already have a checklist ready to go, make sure it’s up-to-date and covers all bases. Staying organized throughout the month-end process is essential to maintaining accuracy and efficiency, not to mention ensuring you have all the necessary information to effectively calculate KPIs.

So, how should you break out your checklist and what are the must-dos for each day?

Day 1 Must-Do: Count Your Physical Assets.

From new and used vehicles to service and parts, every department should use Day 1 of the month-end process to take inventory of their physical assets. Over the following three to five days, your accounting team will take this information and reconcile it against the books, so the sooner you get this data into the system the better.

Day 2 Must-Do: Count the Sales.

Day 2 is for reconciling and counting all the sales for the month. To do this successfully, it’s important to first ensure all sales are completed and verify that none of your assets are missing or out of place.

Day 3 Must-Do: Do an Expense Trend Analysis.

On Day 3, make sure all expenses are in and then conduct a trend analysis to see if you are missing anything. For example, did rent post on the first and 31st of the month or is there a particular utility that has been trending high over the last few months? Doing an expense trend analysis will help you get to the bottom of these questions. Ultimately, you want to make sure your dealership survives and thrives every single month, and getting those expenses submitted is a crucial piece of this.

Day 4 Must-Do: Add Statistical/Memo Postings to the Financial Statement.

Use Day 4 to confirm all your managers’ commissions are properly accounted for. Once payroll has been completed, take the time to ensure your statistical/memo postings are added to your financial statement. This step is vital bbut often skipped by controllers. While Karli notes that the majority of a financial statement is often pulled right from the books, the rest is usually a compilation of little statistical/memo postings that give you a more detailed look into your business and how you’re stacking up against your KPIs. Without these postings, you don’t have the insight needed to measure KPIs. Period.

The role of a dealership controller is critical. You’re responsible for the financial condition of the dealership and you know all the ins and outs of the business. But when it comes to month-end, chaos can quickly break out across departments. While modern, open technology has made the process easier, it still takes all hands-on deck and a structured plan of attack to close out the books properly and on time.

Look to your new checklist and DMS provider to help guide you through the smoke. You want to end each month seamlessly, so take advantage of your DMS provider’s various resources, from training sessions and webinars to peer-to-peer learning exchanges. With the right provider and approach on your side, you’ll take a lot of that weight from the month-end process off your shoulders.

Stay tuned for more as this is part II in a monthly series of must-dos to keep your dealership running efficiently all year long.

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.