Article

What Exactly Is DMS?

August 2006, Auto Dealer Today - WebXclusive

by Jeff Smelley - Also by this author

DMS is a widely used acronym these days and it cries out for a clear definition. DMS stands for Dealer Management System, which on the surface seems to specify something of clarity, but clarity is very elusive when you look at the many varied uses of the term DMS. So let’s define clearly what a DMS should be.

A Dealer Management System should be a system that clearly measures, reports and controls the functions within a dealership yielding quantifiable, reliable and timely information of significant importance to the dealer and dealership management. Now, with that out of the way, what exactly do we mean? DMS most commonly refers to a software solution for your dealership that will meet the qualifications as we just defined them.

There are some basic, but very important, factors that must be present in your DMS software. They are integration, reliability and an audit trail. Integration is simply the exchange of information between operational areas of your software with the purpose of streamlining effort, eliminating duplication and reducing the opportunity for human error. This means that information should be able to flow from one department to another and back; for example, from accounting to sales and from sales to accounting, thereby eliminating the need for duplicate entry.

Reliability of information is dramatically increased when this exchange of information occurs. This information exchange cannot take place in a multiple vendor software solution. More specifically, third party general accounting software, like Quickbooks and Peachtree, do not have the ability to update your inventory when a new vehicle is purchased or reconditioning is applied, therefore separate entries must be made to your sales software and your accounting software.

For dealers with a service department, internal repair orders (when completed) should add to the reconditioning cost of a vehicle and be sent to accounting automatically. Otherwise, the same internal repair order would have to be handled at least three times by different dealership personnel. Each handling of that repair order is an opportunity for error, a waste of manpower and an unnecessary expense. A single vendor solution, to your dealership software needs, provides a much stronger reliability factor and a much improved audit trail.

The importance of a proper audit trail cannot be overstated in your DMS. An audit trail means that no transaction can be processed in your dealership that does not flow through to your financial statement. This requirement provides the necessary information to make personnel accountable for performing their job correctly, handling money appropriately and for tracing the flow of financial transactions from origination to completion. The final resting place of any financial transaction is in your financial statements. Have all the sales recorded, all the cash deposited, all receivables logged. At no time should any completed transaction be removed without showing that it was there and then was reversed. For example, at the end of the year, most dealers will write down their inventory for tax purposes. There should be a traceable record of write downs that supports the original purchase cost of each vehicle and the resulting adjusted cost. Such an audit trail provides proof of your vehicle inventory bala
nce, stock number by stock number. Every aspect of your dealership should be subject to audit trail verification in order to prove that your financial information is correct.

The term Dealership Management System implies a comprehensive set of controls, measurements and reports that provide an accurate picture of your entire dealership. Be sure when reviewing your software or shopping for new software, that you look for a system that will help you and your staff operate and manage your entire dealership; not just sales, not just service, not just accounting. Your success depends on all departments in your dealership working cooperatively and efficiently towards a single goal. Be sure your DMS helps rather than hinders this objective. No other investment can impact your dealership as completely as a good DMS. It provides structure, eliminates work, increases reliability; all of which make profitable growth a reality rather than a dream.

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