Tag: DPO

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.

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.