August 2010, Auto Dealer Today - WebXclusive
The computer software system used in your dealership should work for you. It should provide you information needed to operate your business, analyze your departments’ profitability and efficiency, and review your expenses and other account details. Remember, your DMS is a recorder of history, but it can also help you decide what to do in the future based on your actual results.
Some of the most important information you need to review is your month-end financial statement. This statement provides historical information, which can be useful in projecting the future results of your dealership. You can utilize this information to complete budgets of expected expenses related to the projected sales you hope to realize. Some of the most important data is what helps you generate sales and gross profits.
Your new vehicle department can utilize prior monthly information to help you project seasonal patterns of unit sales. You can review what factory incentives created increased sales and what gross profits you realized from those incentives. To be able to do this, you may need to set up additional general ledger accounts to track the various incentives. These additional accounts can also be used to track how your advertising has benefited your sales.
You will need to setup additional advertising accounts to track the various types of advertising you pay for rather than using one general ledger account for all of your advertising expenses. The different accounts will allow you to very easily review the different types of advertising you spend money on versus the actual sales generated. For example, you will need to have advertising expense accounts for the various major newspapers, the different TV, cable and radio stations, billboards, direct mail, flyers, promotional events, Internet costs, etc.
Your used vehicle department can utilize the same advertising expense accounts your new vehicle department uses. You will need to set up separate advertising accounts for your used department, so you can track specific sales progress from those promotions geared towards used vehicle sales only. To complement this data, you should also analyze the mix of inventory you have currently and compare it to the promotional events sales data history. The worst thing you can do is to spend money on a promotional sales event and not have the correct inventory mix available to produce the needed sales.
Service departments normally require a different structure of advertising. Normally the ads are smaller in size in newspapers or not the same length as car sales commercials on TV, cable and radio. And the amount spent is not even close to what you spend on vehicle sales. If you read my article a few months ago on departmentalizing your service department to increase your sales, and want to put those ideas into effect, you will need to set up the additional expense accounts to track the expenses you will incur.
Your parts department will normally follow what your service department does in sales, as it relies very heavily on what labor sales are generated. Without labor sales, parts sales rely totally on wholesale and retail sales, along with any accessory sales generated from F&I and other sources. There are various management reports in the parts departments that can tell you the aging of your inventory.
Along with your financial statement, most dealership management software provides additional reports to analyze the individual sales and gross profits generated by the vehicle sales, repair orders and parts tickets. These reports can be very helpful in understanding why average gross profits were more or less than your goals.
Another way to utilize your DMS is to review your detail general ledger for all of your expense accounts. This information is invaluable to help you analyze your variable expenses in relation to your sales volume. If your variable expenses are turning into semi-fixed or fixed expenses which have no relationship to the sales volume, then the money you are spending is not working. This indicates you need to make the appropriate changes to turn them back into variable expenses.
Compare the detail general ledger semi-fixed and fixed expense accounts for the past year to determine if there are large variances. If so, are they related to the sales volume for the same time period? If not, you need to investigate why these expenses are changing from the normal amounts.
Most dealership management software offers comparative monthly trend reports showing the prior 12 months side-by-side for all of your general ledger accounts. These reports are very easy to review and can provide the easiest way to maximize your DMS. It is a good place to start to analyze the individual accounts which combine on your monthly financial statements. Variances between the months are more easily identified because each departmental account is separately stated.
Most systems offer reports as a means to “mine” your data. This can be something as easy as copying and pasting data from your computer screen to a spreadsheet for further analysis or extracting data directly from the DMS and importing it to a spreadsheet. Both methods can yield enormous amounts of data when needed for analysis. It may be a parts management report which compares the last time a part was sold to the last time the part number was purchased to the quantity on hand. It may be a used vehicle sales report listing all the used vehicles sold in a specific period. This report can help you decide what vehicles to stock and how many to have on hand for various promotions based on the gross profit and how fast the particular model sold.
Whatever your DMS, try to maximize its potential to enhance your business operations. Many of these tools are never used by most department managers or the dealer because they are too busy to review where they have been. If you want to change what your dealership has accomplished in the past, you have to review your history so you can implement the changes necessary to reach your new goals. It may sound boring, but you need a base to start from to get where you want to be. A little work now can save you from spending money unnecessarily in the future.
Vol. 7, Issue 6