Fourth Quarter, Clock’s Ticking

If we were heading into a football game’s fourth quarter, we would look at the scoreboard and then huddle to discuss any last-minute adjustments needed to win

If we were heading into a football game’s fourth quarter, we would look at the scoreboard and then huddle to discuss any last-minute adjustments needed to win.

So it is with dealers. At the end of the last quarter, we will want to look back and know we had a solid game plan and executed it well.

The parallels apply both offensively and defensively.

Our offensive plan would include such special events as Thanksgiving and Christmas weekend inventory reduction sales.

For the service department, there are opportunities to hold a weekend service clinic featuring specials related to winter. From personal experience, a well-planned service clinic, where all departments are involved, normally results in incremental vehicle sales.

Our defensive plan includes addressing routine fourth-quarter business management items such as:

  • Doing a physical parts inventory.
  • Taking a hard look at new- and used-vehicle inventories.
  • Reviewing personnel productivity and staffing requirements.
  • Examining the status of our receivables, our total fixed-operation overheads and our other accounts.
  • Checking internal-control processes.
  • Some dealers allow their parts manager to make all the arrangements regarding their annual inventory. I would recommend you outsource this and have a member of your CPA firm observe the process.

    By taking a hard look at your new- and used-car inventories, I’m speaking of a few specific items.

    For new-vehicle inventory, first identify any vehicles 180 days old or older and pull them into a specific area.

    Perform an inspection of each one to ensure it will start, there is no missing equipment, the window sticker and the vehicle’s equipment match and there isn’t any lot damage.

    Then physically mark these vehicles so they can be easily identified by the sales staff.

    From a marketing standpoint, “price then/price now” stickers on the vehicles often help the sale, as do specifically timed incentives for your sales force.

    During your weekly management meetings, have your new vehicle managers report on the progress they have made in enhancing the sale of these vehicles. Last, but certainly not least, identify potential reasons these vehicles have been allowed to stay this long on the lot. Install processes to help control this issue in the future.

    With used vehicles, the process is more involved. Not only are you looking at your inventory and any current aging issues, you need to take a look at your complete inventory to ensure the vehicles meet your desired pricing and physical inventory profile.

    As a reference, review your sales, both volumes and types of vehicles sold, during the fourth quarter of 2010.

    I realize this year has been different for the used-vehicle industry, with high demands and low supplies. Regardless, we still must manage our used inventory opposed to just taking trade-ins or buying vehicles wholesale and putting them in our inventory.
    Some quick running plays in other areas:

    Total fixed-operation overhead. This is total dealership expenses excluding variable. By individual expense, compare year-to-date percentage of gross to the percentage of gross each expense was last year. A cursory review will quickly identify any areas that require a more in-depth analysis.

    Prepaid Expenses: There are very few items which should be included in these accounts. For your protection, personally review the balances and ensure that each entry is properly accounted for. I have heard horror stories this year from dealers who have not personally monitored these accounts.

    Internal Controls: Volumes could be written about the dos and don’ts. Review and discuss your current processes with your comptroller and then with your CPA firm. Once you are comfortable that all processes are being properly followed, designate a 30-minute slot for one of your monthly management meetings to review them in detail with your staff.

    Back to the game. We are at the beginning of the fourth quarter and have the ball. What we choose to do with it and how successfully we execute our plays will determine the final score on Dec 31.

    Good Selling!
    Veteran dealership consultant Tony Noland is at [email protected].