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DOLLARS AND SENSE

Whew! Another NADA convention under my belt. I have no idea how many dealers and other friends I talked with over those few days. It's a tough pace for me each year. I started off this year's convention as I normally do by attending the J.D. Power & Associates' International Roundtable meeting on Thursday afternoon. That night I had a dinner meeting with an Alabama dealer client to discuss the terms

Whew! Another NADA convention under my belt. I have no idea how many dealers and other friends I talked with over those few days.

It's a tough pace for me each year. I started off this year's convention as I normally do by attending the J.D. Power & Associates' International Roundtable meeting on Thursday afternoon.

That night I had a dinner meeting with an Alabama dealer client to discuss the terms of yet another dealership he is buying. Friday was back to an all-day session of the roundtable. Friday night, another business dinner with some public dealership executives. Saturday, all day at the George B. Jones booth.

As soon as the convention hall closed, I was off for another business meeting to enroll a new California client for our accounting firm, then it was off to the Dealer Resource Group reception (my favorite party of the convention).

Sunday morning, I was back at our exhibit again until closing. Monday, again I was at our exhibit until closing. That night I had dinner with several members of the Bill Heard organization, followed by the Texas Automobile Dealers Association reception.

On Tuesday I spent all day with the auto dealership CFOs who attended the GBJ Multi-Dealership CFO Alliance Group meeting.

I am going to share with you a couple of the ideas presented by this diverse group of multi-dealership CFOs.

Telephone expense

For a seven-location dealership group with many calls, the telephone lines were often tied up. This group also had multiple dial-up Internet access accounts that exacerbated the problem. The phones were a nightmare just trying to keep up with all the numbers, where they were and who was using them for what. This group asked an independent telephone consultant for help. The consultant:

  1. reviewed the telephone bills;

  2. inventoried the phone lines;

  3. assisted in the installation of a system by which the same lines are shared by all seven locations.

The results were better than expected. The number of phone lines was cut in half. Now calls can be made between locations using a three-digit number. The Internet connection was switched over to the frame relay. Instead of several dial-up fees, the cost of Internet access for all locations was reduced to a total payment of only $75 per month. In all, even after deducting for the cost of the consultant, the savings in 2001 were over $40,000!

Vehicle open-lot insurance coverage

A dealership group had what they thought was a great deal on insurance coverage on their entire inventory of new, used, service loaner and company vehicles.

The rate per hundred dollars of coverage was less than half of the industry norm. This coverage was provided through the floorplan lender regardless of whether the vehicle was floorplanned or not. Then the news came. The floorplan lender had changed insurance providers.

First the bad news. The new insurance provider refused to insure vehicles that were not floorplanned. The dealer group had not been floorplanning its used, service loaner and company vehicles and did not want to floorplan them going forward.

Now the good news. The new insurance coverage rate per hundred dollars would be half the rate the group had been paying. What to do? Floor all vehicles and incur additional interest costs or find other coverage at what surely would be a much higher rate than had been paid even before the change of insurance providers?

The answer? This dealership group was able to negotiate a floorplan offset investment account with the lender that was capped at 100% of the outstanding dealership floorplan balance.

The results? The group floor-planned the entire inventory of new, used, service loaner and company vehicles. They then took cash equal to the amount of vehicles not previously floorplanned, and deposited it in the floorplan offset account which earned interest at the floating floorplan rate. At the end of the day, the net floorplan interest cost was the same, but the vehicle open-lot insurance cost was about half of what it had been. The net savings was almost $100,000 per year.

If you would like your multi-dealership group to be involved with other multi-dealership groups, please contact me directly. After a great week, it's great to share great news with you, but the greatest thing is that I can have all this fun and still get to go home to my great wife and kids.


CPA Don Ray is president of the George B. Jones Companies which includes an ISO 9002 certified accounting firm and computer consulting group in addition to a dealership search firm. He's at 901-684-5643 and [email protected]; website, www.gbj.com.

TAGS: Dealers Retail
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