You use the financial statement to review your revenue and analyze all of the costs associated with running your dealership. Every revenue line represents a product or service and every expense can be tied back to a product or service rendered. Simple, right? Operating a dealership is anything but simple.
What your financial statement won’t tell you
While the financial statement is great for itemizing the checks you send to vendors, it does nothing to identify gaps in your processes and utilization of your time, energy and space.
Perhaps you’ve read about Toyota Quality Management and working to eliminate waste. You’ve already identified and revised processes as well as trained your employees to ensure they follow the process. What’s the problem? While you changed sales practices to accommodate a new trend (hello Internet sales), your other processes may very well be stuck in the pre-Internet era. And well, if you didn’t start selling via the Internet, you probably wouldn’t be reading this today. The problem with our processes is that they only lead us through situations that are alive and present today. They don’t take into account market and consumer changes next year, or five years from now.
Time is Money. Saving time = saving money
When you switched from mailing customer finance packets to emailing/faxing, you saved a bunch of time, right? Did that show up on your financial statement? Maybe you had a few more charges in faxing and less spent in mileage reimbursements. But where you really felt the cost/benefit was in your employee’s time. You didn’t require a runner or postage to ship off that finance packet to the lender. And you got funded days or weeks sooner. Huge payoff!
While the process changes always seem to start in the front end with sales, let’s not stop there. You also have a Service and Accounting office within your dealership. Where can you save money there?
Ask your frontline employees where they think time is wasted
Your employees are your greatest asset, and successful, well-trained employees are crucial to a successful dealership. Ask your employees what they spend their time on that they wish they wouldn’t. If you’ve got great employees who trust you, they’ll be honest and tell you the truth. Most likely they are spending (wasting) time on things that they don’t have time to solve.
Ask your Service and Accounting people to tell you what they wish they could stop doing. Do you think filing paperwork might be something they would suggest to you? Our files are critical to mitigate risk against audit fines, lawsuits, why would they want to stop filing? Because filing takes a tremendous amount of time.
Your financial statement won’t tell you that you’ve been spending too much money filing in paper. Between employee time, using valuable onsite storage and putting your dealership at risk for audit fines, paper filing is full of hidden costs that will steal thousands of dollars from your dealership every year.
Filing Electronically is Much Simpler and More Efficient
With the advancements of technology, filing can be much simpler and more efficient when done electronically. How can filing electronically save my people time, you ask? Or, I can’t get away from paper because the IRS or manufacturer won’t allow it? It’s actually quite simple. You can still get your wet signature from the customer and meet your legal requirements by scanning your documents and uploading them to the cloud.
Scanning your documents begins a lot like paper filing. Documents are signed by the customer and finalized by your finance and accounting department. Here’s where the change begins. Instead of filing your documents in the filing cabinet at the end of the day or end of the week, drop it in the scanner and click scan. Send your documents to your virtual filing cabinet.
The biggest time savings comes next. With paper filing, if you need to find a page out of the file, you need to leave your desk and grab the file. How long does it take to find that file? If you ask your employees they might say it takes 30 seconds to find a file if it’s in the same office. But what if it’s not filed where it should be? What if the filing cabinets are stored a few minutes away? What if it’s lost?
Do you rent a container on-site for file storage? Maybe your old deals are filed over your parts department. Sure, it’s only a three minute walk from the accounting office. If you sell 100 cars per month, that’s 100 files up and down the stairs or into the filing container. If you limited the filing to two employees, you still are spending $400 month on filing car deals.
Monthly Filing of Car Deals (you put away)
2 employees filing car deals
x 100 car deals per month
x 6 minutes walking (there and back)
x 1 minute to store each file
x $20 hr per employee
= $400 month spent on filing
Do you know anyone who can carry 50 car deals? Okay, maybe they took a few more trips. Let’s suggest they could manage 10 car deals in their arms. That’s 9 more trips to the filing container.
9 trips x 6 minutes walking (there and back) = extra $18 month
How much do you think you’re spending when your employees need to pull one of those files? Let’s be conservative and only pull 10% of your car deals after you file them away. And that’s assuming they know the alphabet and can file in the correct order!
Monthly Files of Car Deals (you pull)
2 employees pulling car deals
X 10 car deals per month (10% of 100 car deals sold)
X 6 minutes walking (there and back)
X 2 minutes to find each file
X $20 hr per employee
= $80 month spent on pulling car deals
Now, these figures are assuming your employees walk straight from their desk to the filing container. They don’t get interrupted by a coworker, don’t stop by and chat with someone, don’t assist a customer. You would probably agree it’s safe to add 10% to the time taken to file, just because our people are still people.
$418 monthly spent on putting away files
+ $80 monthly spent on pulling files
x 10% employee time lost with distractions
= $547.80 monthly spent on filing
Our customers estimate that it takes 30 minutes to find a lost file.
Ask your employees how much time it takes to find a lost file. Just one employee searching for one file. Ask them how many times they are searching for a lost file each month. Then do the math. That’s a lot of money, gone. Time lost not helping customers, time lost not answering the phone, time lost with a customer on hold waiting for an answer. And you said your customers were your priority.
Here’s what it looks like if your accounting office staff of 4 people each searched for five files per month.
Monthly Cost to Find Lost Car Deals
x 5 lost files per month
x 30 minutes spent per file
x $20 hr per employee
= $200 month spent looking for lost files alone
If you have been keeping up, that’s $747.80 spent each month on filing.
Audit Preparation is Expensive
Do you experience employee turnover? Yep, it’s almost synonymous with an automotive dealership. If you aren’t careful, your paper filing will get out of control just as quickly as a potential sales customer walking out the door. Sure, you’ll get caught up with filing when you hire that extra office staff. But what if you are hit with a surprise audit before that day comes?
A dealer who has paid tens of thousands of dollars in audit fines knows the risk of letting the files stack up. That one warranty repair could cost you hundreds of dollars if you simply can’t find the file. One missing file leads to more added to the list, you know how this goes. Before you know it, you’re kicking yourself for not making sure the filing is under control.
Storing your repair orders and car deals electronically alleviates the pain of searching for that warranty file. When your documents are stored electronically, you can quickly copy the files requested in the audit to a separate folder and grant access to the auditor. Gone are the days of asking one of your staff members to pull files for half of a day. That’s filing time we didn’t account for earlier.
1 employee x 4 hours pulling files x $20 hr per employee = $80.00 audit preparation
Do you take time to review the files before the auditor steps on-site? Likely it’s your wages being used for file preparation, which is costing your dealership hundreds of dollars. This audit is getting expensive and it hasn’t even started!
Price per Square Foot
Has your manufacturer been pressuring you to update and upgrade your facility to make space for your future? No doubt they have demographic projections based on your primary market area and they want you to build a bigger showroom and add more service bays for your future employees and customers to occupy. But what about the space you already have? Could you optimize it to create more room in your dealership for a BDC or more parts storage?
Storing your documentation physically means sacrificing valuable real estate for your old files. You might think that storing your old accounting documents above the parts department is really no big deal but consider asking your parts manager how many more vehicles could be repaired daily and monthly if he had an extra 1,000 sq feet to store more parts. That’s a win for both the parts and service departments! Could you sell more wholesale parts to body shops in the area? We often take for granted the space we are already occupying.
Once you begin to take a look at the processes within the dealership you will be surprised at what you will uncover. You may find that you can easily solve problems in the dealership and save hundreds or thousands of dollars each month by simply talking to your frontline employees.