Warranty Audits: Keeping your Dirty Dozen Clean
Rex Collins Rex Collins
CPA
Somerset CPAs
Friday, September 01, 2006
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Some call them the Dirty Dozen.
  1. Customer signatures.
  2. Repairs to dealer’s inventory and other items not covered.
  3. Add-on repairs.
  4. OLH time.
  5. The three “C’s” (complaint, cause and correction) and other documentation.
  6. Record retention.
  7. Parts retention and other parts issues.
  8. Sublet.
  9. Self-authorizations.
  10. Repeat repairs.
  11. PDI claims.
  12. Batteries.

Whatever you call them, make sure they don’t become your warranty audit problem areas.

Dealerships should have a financial person who makes sure every required detail by the manufacturer concerning warranty categories are known and followed. In addition, each month, dealerships should review the manufacturer’s expense report to identify areas of potential concern before an audit occurs.
 
Also, dealers should remember that a technician is supposed to perform the appropriate documentation, not a service advisor. Any gauge or instrument reading needs to be documented and attached.
 
Each month dealerships should review the manufacturer’s expense report to identify areas of potential concern before an audit occurs.
 
Here are additional ways to protect you if an audit occurs.
  • Keep one year’s worth of records. (Check with your CPA on other record retention requirements.)
  • Using non-genuine parts is prohibited, including fluids. Go through scrap bins and make sure no after-market packaging is there.
  • Parts departments should not give out a new part until they get the old one.
  • Don’t claim repeat repairs.
  • Ensure that claim procedures are followed concerning batteries.
  • You can’t make money if you use a vendor that charges less than what the warranty allows.
All is not toil and trouble, though.
 
In particular there are two areas that dealers many times overlook that can help the balance sheet. Remember, you can claim time for transporting vehicles. In addition, many dealers do not make claims for items such as topping off fluids.
View all articles by Rex A Collins
View all articles in Legal & Accounting Dealer Operations

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