Results of 1000 Dealer Audits
Cash is King, so the saying goes.
In the automotive industry, this is especially true as cash flow management is one of the key challenges for dealers with literally millions tied up in vehicle inventory.
The automotive industry is a very competitive and fast-paced environment. With tight profit margins, it’s important for car dealerships to find ways of increasing revenue while reducing costs.
One way that many dealerships can do this is through effective stock management.
It can be difficult to keep track of all the inventory at a car dealership, as vehicles come in and are bought from stock regularly. Clear and followed processes for stock management can help to ensure that the dealership is not missing out on any revenue opportunities and has an accurate view of their inventory.
When a vehicle is sold, it should be invoiced and removed from the dealership’s stock immediately. However, when we surveyed 1000 dealer audits, we found that 4.7% of vehicles had been delivered without entering the sale into the system.
To put this in financial terms, if a dealer has 200 vehicles in stock at an average price of €25,000, they are failing to invoice €250,000 of stock.
Financial Impacts of Poor Stock Control
Some of the key impacts on business performance that can occur through ineffective stock management include:
Cash flow – by failing to invoice, the dealer is missing out on the benefit of receiving the cash from the sale of the vehicle.
Payment of associated costs such as VAT and commission payments may be made in advance of receipt of payment for the vehicle. This negatively impacts cash flow.
Lost sales – if the vehicle is still showing on the system as on stock, it may be advertised as for sale. Any customer enquiries will result in disappointment, damaging the reputation of the dealer and the brand.
Finance costs – if the vehicle is still on the system then the dealer may be paying for finance on that asset unnecessarily
Funder reputation – poor stock control may result in a lack of trust amongst funders, impacting the ability to access finance.
A dealer that can accurately report their stock levels will be in a much stronger position than one who cannot.
Bottom line: poor stock management can result in lost revenue for dealerships as well as reduced customer satisfaction.
Why Does This Happen?
One of the benefits of working at CheckVentory is the amount of industry data we get to compare and contrast across markets, brands and verticals. It never ceases to amaze us how many times we are working with very professional and well-organised dealer groups but still identifies seemingly simple processes that are not implemented or followed as expected daily.
The main reasons for this include:
- Overstretched resources, high-pressure targets, and tight deadlines
- Lack of ownership or accountability, with an expectation that someone else will do the job.
- ‘Sandbagging’, all sales paperwork delivered in batches at the end of the target period
- Poor communication between sales and sales admins
- Incomplete paperwork processes
- Poor training
- Lack of effective controls
What’s the Answer?
How do we go about solving this issue? There are numerous ways of going about fixing this issue, but the key is setting a standard across your group for delivery rules. Meaning that a vehicle CANNOT be delivered unless it is invoiced!
Some examples are keeping the spare keys in the sales admin office which is a practical control, as well as having the workshop PDI instruction reference the invoice number.
Regular substantive and consistent audits can identify these anomalies and help drill the issue down to a particular dealership, administrator, or even salesperson, which allows for fast correction.
More importantly, audit results can also identify the absence of particular anomalies, identifying areas of best practices within the network, enabling a buddy system to strengthen processes across the dealer group from within the group.
Find Out More
With CheckVentory Audit, you can access many powerful features that help your dealership increase revenue while reducing costs. For example, the audit will identify and flag potential issues with vehicles before they become problems for you to deal with in the future.
We’ve seen first-hand how much more successful dealerships have been after using this tool!
Click here to find out more about CheckVentory Audit can help your business.