Why You Are LosingDollars — And Don’t Know It!

How is it that Dealer A has a larger labor rate and a larger parts mark-up percentage than Dealer B, but Dealer B collects more warranty dollars per repair order, per repair type than Dealer A? That shouldn’t be the case, but it happens throughout the industry.

Do you know why you aren’t maximizing the hard work that was put into getting those uplifts? Many dealers don’t because they look at their fixed operations and the warranty process as separate bite-sized components. To understand the complete picture, you have to engage every member of the team involved in the life cycle of this money and make sure they are all working toward the same goals.

That can be difficult if each person’s incentive is aligned toward a different goal. Are all your team members who touch on a warranty claim thinking about this like the owner of the business? An owner wants to maximize every repair dollar on a ticket within the boundaries of the manufacturer’s policies and procedures, within their state laws, so that he or she can collect all dollars with virtually no risk of losing them. He or she also wants to do this quickly and efficiently so the most can be made out of each person’s time and effort to increase overall volume. In summary, they want all the parts and labor dollars processed correctly and quickly with little or no audit risk.

Many employees know that money is the name of the game, but they are incentivized by goals that hurt the dealer’s overall ability to get all their dollars and to keep all their dollars. Several positions within the life cycle of a repair order are paid on the dollar amount (parts and labor) of claims closed in the DMS system. They are also given benefits if they close claims quickly. Closing repair orders is not the same as getting claims paid fully. Do you know if their efforts are maximizing the dollars? Do you know if their efforts are creating audit liability? Do you know if they are slowing down other employees in the chain and creating inefficiencies which means fewer dollars captured in a day?

If you have individuals who just focus on their role in the process (because that is how they are paid) and they don’t fully understand the complete picture, you are more than likely missing out on dollars and creating disorganization at many levels in your service department. Disorganization resulting in wasted time and money that creates liability for your dealership.

LOOKING OUT ACTUALLY MEANS LOOKING AROUND
It’s not enough to look forward in your operations. You must look around. If your team isn’t cohesive in the approach to capturing dollars, you will create liability in the form of monetary loss, audit recapture, or overinflated payroll due to inefficiency.

Following are some questions you should be asking yourself.

How is your process helping the client to express their needs to the service advisor?
How is your service advisor helping the technician to be efficient in their ability to diagnose the car correctly and not miss all possible repairs?
How do you know your technician is maximizing the repair of the vehicle with all the allowable work and parts?
How is your parts department helping the technician with checks and balances so their repair is comprehensive and complete?
How is your service manager identifying areas of training that are needed to speed up the flow of money?
How is your warranty administrator communicating deficiencies back to management to avoid delays, missed dollars, and audit risk? Is your warranty administrator sharing all adjustments with the business office?
How does the office confirm the data on adjustments so they can make sure all the money is collected properly and applied to the appropriate accounts?
If there are adjustments to the schedule, how can corrections in the process be made so the adjustments don’t continue in the future?
Does the business office know if advisors, technicians, and managers are being overpaid for claims closed for more than what was actually paid for by the manufacturer?
Are the individual steps an employee is taking in this claims process making things easier for themselves but reducing your receivables?

PROFITABILITY IS THE END GAME
The bottom line is that profitability is the responsibility of everyone at the dealership because the actions in their job role depend on it. If they don’t understand how their role plays into the big picture, you must train them to work as a team. You can make them feel valued by being part of this larger picture. There is always room to improve because the manufacturer is constantly changing. Look at ways to incentivize and drive your whole team in the same direction. Your bottom line will be better off if you do.

JUSTIN CARR
Vice President of Warranty
Processing Company
WarrantyProcessing.com