Page 33 - GIADA-June 2018-Final 062718

FINANCE

Systematically Cut Car Dealership Costs

By Jodi L. Kippe and Steven D. Wojcicki

To combat competitive pressures on To help manage and reduce expenses in including putting mechanisms in place
front-end gross profits, car dealers should this area, dealers should establish monthly to minimize spot purchasing decisions.
evaluate where they can reduce expenses goals and monitor actual expenditures. • Implement compliance processes to
and restructure their operations. make sure approved vendors are being
The goal should be to create cost-effective used and that the dealership is being
Several software tools are available to help advertising programs using both traditional charged the contracted rates.
managers perform this analysis. Such tools and digital forms.
should allow dealers to do the following: These are some additional ways dealerships
• See all dealerships side by side or Computer equipment and software can look to reduce expenses:
take one dealership and compare the Review all monthly invoices to make sure • Use full capabilities of service loaner
current month with previous months. you are paying for contracted services management software to look for
• Compare similar franchises to one at contracted prices and not paying for savings opportunities related to service
another. equipment no longer used, such as an out- loaner use.
• Compile data from more than one of-service printer. A dealership paying for • Review use of outside services to
dealership management system. This unused software applications should not determine if moving these functions
is important if a multi-dealership renew those contracts. in-house might save money.
group has stores operating on more • Look for savings opportunities related
than one DMS. To better manage contract terms and to utilities. Example: installing high-
• Set and review targets and goals. costs, limit the signing of contracts for efficiency lighting.
• Capture specific departments’ cash- hardware and software to a small number • Rein in miscellaneous expenses,
management items. of authorized personnel. such as lot damage and extravagant
• Send alerts via email so dealers can employee recognition dinners.
manage by exception. INSURANCE • Take advantage of a well-managed

Gain a better understanding of deductibles, accounting office to help reduce write-
Here are areas to focus on cost-cutting: including the risks – from cost and offs and improve cash flow.
FINANCING frequency perspectives – of submitting • Dealers should include managers in
The cost of financing has risen in recent claims on property and casualty insurance. establishing a plan, by department,
years. This trend is expected to continue. to reduce costs. Setting intermediary
At the same time, the rising cost of vehicles Review the payback period, which is goals can help assess progress, which
and days’ supply of new vehicle inventory, computed by dividing the increase in can be monitored month by month or
combined with increasing pressure by deductible by the premium reduction. If quarter by quarter, depending on what
manufacturers for dealers to offer new and the payback period is fewer than three seems most appropriate.
upgraded facilities, contribute to rising years, consider taking a higher deductible • Aligning managers’ compensation to
financing costs. for reduced premiums. expense-reduction goals can go a long
way toward helping the dealership

Dealers should do the following to offset Understand the current state of the achieve those goals.
increasing costs of financing: market and market cycles and look for
• Understand if an annual audit or opportunities to negotiate a reduction in To capture expense reduction on a long-
reviewed financial statement could premiums. Obtain quotes from more than term basis, management should implement
reduce one’s rates. one insurance provider, including current standardized processes and controls and
• Review or establish an inventory days’ providers. assign specific staff members to “own”
supply target. expense categories.
• Improve the dealership’s sales and BUYING POWER
contract-funding process. These are some ways to capitalize on buying Every change counts. Even seemingly small
• Implement a strong cash-management power: changes can add up to big savings. n
program. • Review vendor contracts and eliminate Jodi Kippe and Steve Wojcicki are with the
low-performing vendors. accounting firm Crowe Horwath. They can
ADVERTISING • Use current high-performing vendors be reached at jodi.kippe@crowehorwath.com
The median advertising cost per retail unit for additional services. and steve.wojcicki@crowehorwath.com.
sold for all dealerships is approximately • Use master vendor contracts.
$360. • Improve purchase order systems,
GIADA Independent Auto Dealer JUNE 2018 | 31