The COVID-19 pandemic has further accelerated the adoption of technology-enabled audits by funders, with travel restrictions limiting the ability for auditors to visit dealership sites.
However, for some time before then, funders increasingly recognised that traditional, paper-based manual audits are no longer enough, with many floor plan funders exploring new technologies to support the audit process as it shifts to a digital audit.
This growing demand for digital auditing, which allows financial institutions to allocate resources more efficiently and reduce operational costs, has resulted in the emergence of several solutions. These vary in their sophistication and robustness, ranging from a simple scan to continuous monitoring.
In this article, we look at the dealer self-audit technology solutions replacing physical audits for finance companies.
The Need for Dealer Stock Audits
Stock Audits are required to find out the actual inventory numbers and current standing of assets. This information is crucial for dealerships and their financial partners as it supports risk management processes, allowing effective management of lending risks, reducing delays in reimbursement once a vehicle is sold and increasing confidence in the number and current standing of actual assets
The benefits of carrying out stock audits include increased confidence in the number and status of existing assets, minimised risk and avoided unnecessary loss, and quality assurance through asset condition reports. In addition, through regular audits, funders can access accurate data about the extent and value of their dealers’ finance portfolios in addition to rapid notification of changes to dealers’ risk profiles.
The Evolution of Dealer Self-audits
A wide range of technology-based digital audit solutions has been released to fill the gap between the funders’ requirements to enable dealers to self-audit and the inadequacies of the conventional, manual approach. Many have been adopted from other industries, particularly those that deal with massive, rapid-changing inventory, such as storage and delivery companies.
Each of these has benefits and drawbacks, especially when it comes to the unique challenges of the automotive sector.
While placing floor plan audit responsibility in the hands of dealerships has delivered many advantages, it has also highlighted the limitations of manual, paper-based audit regimes and accelerated the switch to more robust, technology-based methodologies.
Benefits of Digital Auditing
After many years of manual funder audits being the industry standard, the shift away from this has been welcomed by all parties. The elimination of the requirement for funders to send auditors to visit geographically disparate dealer network locations saves time, money, and emissions. Dealers are also spared the disruption of interrupting consumer sales and service that these visits typically cause.
Along with reducing cost and distraction from daily business, dealer self-audits allow for greater frequency of vehicle stock appraisals and, therefore, provide more accurate and timely data on which to make future funding decisions.
While placing floor plan audit responsibility in the hands of the dealer network has delivered many advantages, it has also highlighted the limitations of manual, paper-based physical audit regimes and accelerated the switch to more robust, technology-based methodologies.
Key Technologies Used in Dealer Stock Audits
Barcode / QR Code Scanning
At the most basic level of vehicle audit digitisation, we find barcodes and, the more recent development, QR codes. Familiar to everyone, from an asset audit perspective, they simply provide a unique identifying tag (sticker) that can be applied to an asset and scanned using an inexpensive dedicated reader or a smart mobile device.
Another method of digital audit uses NFC stickers. NFC – or near-field communication – is the same technology used in contactless payment systems. It works by applying the NFC tag in the form of a sticker to the car’s windscreen as it arrives at the dealer.
The sticker is then scanned by the auditor, using a mobile phone, to track the vehicle as part of the auditing process.
Radio Frequency Identification
Further up the audit technology ladder is Radio Frequency Identification (RFID), which may detect tags up to four to five meters away, as opposed to Near Field Communications (NFC) that can only see tags within a few centimetres.
These systems use a scanning device to communicate with tags applied to assets using different types of radio waves. RFID technology is often used in large-scale warehousing, where hundreds of stored items can be scanned in a single sweep of the device.
Advanced digital audit solutions use imaging technology to identify physical assets at a precise time and location using the vehicle’s unique VIN (Vehicle Identification Number). The process is as follows:
- Using a mobile device, an image of the car’s VIN is captured.
- The vehicle’s VIN is then cross-referenced with the recognition software to verify that it matches.
- The digital audit record is immediately stamped with the location and timestamps.
- Additional images can be recorded to identify the condition of the vehicle and note any damage.
The Connected Vehicle
The growing connectivity of devices in both industrial and consumer contexts means that the Internet of Things (IoT) is fast becoming one of the richest and most significant sources of data for decision-makers.
From a vehicle audit perspective, connectivity means accessing the asset’s onboard data and automatically appending this to vehicle records within the dealer’s database. This data could include mileage, service records, emissions performance, collision reports, and a variety of information about the vehicle’s specifications in addition to the current data collected by digital audit tools.
There are two primary approaches for obtaining this information:
- Using a device plugged into the vehicle’s OBD-II port that can be wirelessly connected to a device running the audit software.
- Connecting directly to the vehicle’s engine control unit (ECU) and other systems via its wireless internet connection.
Download this free white paper for further information on the benefits and drawbacks of these technologies.
Selecting a Technology
While there will be no single audit methodology that fulfils every funder’s requirements, there are some key considerations in finding the best solution. These include:
- How thorough is the auditing process, and does it provide convincing evidence of every vehicle’s existence and location?
- What additional information does the solution provide to augment the audit data?
- What costs are involved, and what other technologies need to be implemented?
- What vulnerabilities are there that unscrupulous individuals could exploit?
- Is the solution capable of evolving as new technologies emerge?
To view the full white paper, you can download this in PDF format here.
CheckVentory Audit is the funder solution for monitoring funded stock portfolios across dealer groups.
Via a sophisticated digital platform, CheckVentory Audit goes beyond providing an accurate and up-to-date view of dealerships’ portfolios; it actively assists in identifying those dealer groups that provide the most significant opportunities for growth for financing solutions, as well as highlighting potential risk issues.
Read more about our inventory solutions here.