Dealership Operations Reporting

As a retail automotive CFO I struggle with ways to get General Managers and Department Managers to take the time to read and digest important operating information. In the automobile dealership (as in most other businesses) it is not only what we report that is important, but how we report it. In the dealerships our management team needs to spend most of their time where the action is, not in their offices analyzing reports.

As retail automotive CFOs the end game is to influence our management team’s performance through our strategic reporting of operating information.

Types of Operating Reports

Typically the operating reports we issue include the following types of information about an individual, team or store’s performance:

  • Revenue Generating Performance

    • For example, Unit Sales & Gross Profit Revenue, F&I Penetrations and Per Unit Revenue, Repair Order Effective Labor Rates and Hours Per RO
  • Asset Management Performance (amounts and aging of assets they control)

    • For example, Over-aged Used Vehicle Inventory, Parts Obsolescence, Contracts in Transit Days Sales
  • Market Performance.

    • For example, Geographic Market Share, Demographic Market Share
  • Human Resources Related Information.

    • For example, Employees due for Performance Review, Employees due for Compensation Review, Employees with Excessive Over Time Compensation
  • Compliance Related Information.

    • For example, Open Recalls on Vehicle Inventory, Employees that haven’t completed their OSHA training

Included in this list could be Accounting Related Reports but that is for another time. There are wonderful things we can do to make the review of accounting data (in the CDK dealership) more efficient (and more pleasant) which I will cover in subsequent blog posts.

Effective Reporting

In the past many of us have printed reports on paper and handed them out at meetings. Reports handed out at a meeting tend to have the same importance as the person calling the meeting (as long as they take ownership of the reports). Some meeting attendees will read the reports during the meeting, some will read them after the meeting and some won’t read them at all. Currently, we seem to prepare the same reports but in order to save paper, we print them to PDF and email them around as attachments either before or after the meeting.

In my experience, there are a few important points or “ifs” that drive whether or not a report will be reviewed and be effective:

  • If the delivery or circumstances directing the delivery is effective at interrupting or garnering the attention of the manager.

    1. One of the reasons reports get reviewed at meetings is because they interrupt the attendee and grab their attention (if only for a minute).
    2. Contests are an example of very effective circumstances directing delivery. I have automated key performance reporting via text message in contest situations at varying frequencies. They always get read and understood!
  • If the manager is aware of the distribution list.

    1. It makes a difference if a manager knows that their superiors and peers are reading the same report.
    2. For example, if my operating results are reported (and ranked) with my peers in other departments or other dealerships, I will naturally start trying to beat the others. As I have mentioned in previous posts, with competitive ranking, everyone improves. Even the person on the bottom.
  • If the report is easy to read and is aesthetically pleasing.

    1. Reports can’t be too busy.
    2. Consider the following criteria, for example, to determine the best reporting system for the report:
      • The information to be presented.
      • The frequency of the report.
      • The data connection if any.
      • The ease of refreshing the data.
      • How the report will be delivered.
    3. The reporting medium currently available include (and there are many more):
      • Voice
      • Text
      • HTML
      • Excel
      • Word
      • Excel PowerPivot
      • Excel PowerView
      • Tableau
      • PowerBI
      • PowerApps
      • PowerPoint
  • If the information is correct and verifiable.

    1. For example, ranking salespeople on some performance data such as total counts, commissionable gross and New to Used ratio, I will pull the data out of CDK using FI-WIP (if I am using RPG) or ed.vehiclesales_v (if I am using DDA).
    2. I will then use an Excel Pivot Table with expand and collapse buttons to show (if clicked) all the deals making up the performance data reported for each salesperson. The data is easily verifiable with the help of the F&I Manager who capped the deal.
  • If the presentation (delivery) system is effective and secure.

    1. Reporting systems are the way in which the report is prepared and presentation systems are how the report is delivered or provided to the recipient.
    2. Security is a key factor in the presentation system. Security may not be key in the reporting system unless the reporting system is not compatible with any secure presentation system.
      • Is the nature of the information reported not a security concern?
        • For example, a listing of over-aged used vehicle inventory by dealership without VIN and customer information would not be a security concern in my opinion.
      • If the information reported is of a sensitive nature:
        • Can only the intended recipients initially access the report?
        • Can the report be forwarded?
        • Can the report be modified in its original presentation system?
        • Can the report be copied?
        • Can the report be copied and distributed in another way?
        • Can the report be copied, modified and distributed in another way?
    3. Interactivity is a key factor in the effectiveness of a presentation system. If the system engages the recipient by allowing them to “slice and dice” the data, all the better.
    4. Examples of presentation (delivery) systems:
      • Verbally
      • Paper
      • Email Attachment
      • Text Message
      • Body of an Email
      • Amazon Alexa/Google and other interactive voice technologies
      • Intranet Website
      • World Wide Web Website
      • SharePoint Business Intelligence Features
      • PowerBI
      • Tableau Online
      • Excel Online
      • Word Online
      • PowerPoint Online



How to Make More Money In Finance (or any department)

Rank the producers (finance managers, service advisors, salespeople etc) and display the ranking for all to see! Its that simple.

I can’t encourage this enough. In fact I blogged about it briefly a few years ago and people who know me know I harp on this a lot. It is so simple that everyone should be calling me and saying “John, I get it. I see how this can work magic in my dealership. Show us how to do this.”

Here’s how I do it:

  • Using Microsoft I create an Excel 2013 (or 2016) workbook and using the latest Excel feature (Power Query) I access the CDK Data Server/Repository I have setup (DAP, MDA or RPX)
  • I pull the data into the PowerPivot (new in Excel starting with 2010) create relationships and measures (stats)
  • I create a pivot table to rank and display stats
  • I add slicers so folks can interact with the data
  • I host it in a Site (SharePoint Online) in Office 365
  • I fine tune who is allowed to see it using Site permissions (Usually everyone)
  • I make sure automatic refresh of the data is setup so everyone is always looking at current data
  • I send everyone a link to the new report
  • I sit back and watch the numbers go up.

Here’s what it looks like for F&I Managers:

FI Store Ranking Obscured

If you need help, shoot me an email

The Perfect CFO for the Automobile Dealership Group

I have been involved in some excellent discussions and debates lately about the financial management of automobile dealership groups and what the successful enterprise needs. The conversations pertained to the significantly sized group of automobile dealerships say, more than 5 physical locations, where, not only is it not possible to have a continuous physical presence, but it is extremely difficult to manage, new, untrained or inexperienced management and staff.

The debates did not pertain to public companies as in those enterprises, the CFO has an entirely different job description than in privately held dealership groups. In addition, Private Equity makes things interesting for the CFO of an otherwise traditional structure and typically indicates there is a dynamic and talented, albeit highly leveraged, entrepreneur to work with which, in my experience, is always a pleasure.

The cornerstone of the successful financial management of automobile dealership groups is the CFO. My experience has been that the CFO in the privately held arena is first and foremost, the business process expert. The one that knows how it should go given the goals and constraints of the organization. We maximize the amount of profitable transactions with checks and balances and internal controls baked into the process.

The good news is Automobile Dealership CFOs like this are available and this is who and what they look like:

  • They are well-trained in accounting and business policies and procedures. Not only to understand the environment where they are engaged, but to be able to be flexible and creative in the process. Think musician having a command of his instrument. They should have passed the CPA exam and gained at least 5 years experience in public accounting with mostly auto dealerships and their owners as clients. The majority of their public accounting experience should be in management advisory services not audit or tax. A person such as this will have seen what they need to see to have the depth necessary to be on your team.
  • They will have workout and turnaround experience. After their public accounting experience they will have sought out problems and gained experience in fixing them. They will have seen the ones that went broke and why and struggled to rehabilitate them and sell them off for the benefit of all, the owners, creditors and employees. They will know:
    • How to find cash where others find none.
    • How to find financing where others find none.
    • How to protect assets.
    • How to recover assets.
    • How to stage a come back in sales and profitability.
  •  They will understand what their mission is: to dedicate their business life to maximizing shareholder equity and minimizing risk; thereby ensuring the growth and profitability of the enterprise.
  • They will have Business Intelligence know-how. The will dedicate themselves to making sure all, on the front lines and in the executive suite, have accurate and timely information. Wikipedia says it very well:

    Business intelligence (BI) is the set of techniques and tools for the transformation of raw data into meaningful and useful information for business analysis purposes. BI technologies are capable of handling large amounts of unstructured data to help identify, develop and otherwise create new strategic business opportunities.[1]

  • There is no substitute for the right experience which is:
    • The right experience is ass-on-the-line, varied, cutting-edge and continuous improvement experience.
    • The best CFO will have experience in large groups as Business Manager, Controller, Owner, GM, Used Vehicle Director, Sales Manager and Sales Person (usually prior to, in college perhaps) and every and anything in between.
    • They will also have experience in small dealership groups and even single points where they have had to do it all.
  • They will keep well-trained and current in technology and new advances in their business environment. Training is not information gleaned from vendors. CFOs who stay current know what is concerning lenders, what new tools are available for improving productivity throughout the organization, and what new risks are presenting themselves. They know this by reading, not by traveling around the country taking courses and attending symposia.

I was declared the winner of the debate (naturally) because my argument is sound. I argued the proposition that the great CFO is one who can ensure the organization grows by leaps and bounds without losing control (minimizing risk). The great CFO seeks annual returns on assets (ROA) on the order of 25%. A return commensurate with the risk taken. The only way is with knowledge, experience and most important, understanding.

I stressed that one cannot know what one has not experienced and, experience, while being necessary, is not sufficient. What is required is understanding. Understanding comes from a mix of experience and training such that, to use the music metaphor; the jazz virtuoso, who has a well-trained ear and command of his instrument, can play wonderful music anytime with anyone. So the virtuoso CFO ensures the right things happen so that growth and profitability abound.

Advice for the Toxic Manager

Toxic Managers
Over the years starting when I was a Partner in charge of Management Advisory Services at an Automotive CPA firm in Los Angeles, I have met many toxic owners and managers of car dealerships. They weren’t toxic to me so much as their employees. The car business seems to attract these folks because relatively untrained and uneducated owners and managers of car dealerships will hire them. I have had to gently counsel these folks over the years and my advice is always very similar:

“If you have hired and fired hundreds of people over the last few years the problem isn’t the employees, its you. Get some training. Try Dale Carnegie Training or anything.”

In other words if you have these problems it is an indicator you may be short on interpersonal skills.

The toxic manager can have many characteristics. Here are a few:

  • Ridiculing or insinuating an employee is stupid or beyond hope in some way. Especially bad in front of others.
  • Dismissing employee’s suggestions out of hand acting as if they couldn’t possibly have the best interest of the dealership in mind.
  • Pressuring employees for better performance; acting as if all employees are mooches and need constant whipping to get one’s money’s worth.
  • Criticizing an employee’s performance at their job when they were covering a more important function (selling or customer service) because another toxic manager couldn’t.

There’s more. If the spirit moves you add some to the comments.

Easy Forecasting and Tracking for Car Dealerships

Over the last several decades I have been associated with the automobile retail business and have always been a huge proponent of monthly and annual forecasting. It has been very cumbersome and difficult for some stores but I have found a great system that does not take up an inordinate amount of time for our important sales management folks and yet motivates them to set new records in sales and profitability every month.

With the improvement of Microsoft’s online Sharepoint application even the smallest of dealerships can have an effective and very secure internal management reporting website. A highly secure website for dealership employees with extremely detailed permission levels (IT guys call it extremely granular permissions). Communication is a key component of motivating our people.

Don’t Strangle the Store!

It is very interesting to me to watch a management company (upper management not physically in a store) try to turn around problem dealerships. Over the last 13 months business has been very difficult for car dealerships (and other businesses) and many of them have needed turnaround and workout services.

I have personal experience operating dealerships in severe economic conditions from a time when I ran a dealership in California. Conditions then were similar to what we have now.

The downturn caused me to focus on expenses, after all customers just weren’t coming in like before. After severe cuts in expenses including personnel, I thought I would enjoy incremental positive improvements in net income. Unfortunately the store experienced a drop in gross profit below the level we were at when we started cutting. This was extremely trying for me. The more I cut, the more gross would drop.

The problem I had was this: was the economy getting worse or was I cutting my own throat? Panic cuts have an adverse effect on the business for sure but with training, a good attitude and decent leadership the employees hopefully will continue producing even if it is at depressed levels. I expected the sales and productive people to at least maintain the new recession levels we were trying to adapt to. Unfortunately, to use a developer term, our dealerships weren’t very scalable.

An automobile dealership organization I know currently has a few struggling outlying stores. Management groups controlling dealerships are often headed up by administrators. When a store starts slowing down, they tighten it up. They make the GMs cut people and reduce inventory in an attempt to reduce expenses so the stores turn a profit. Unfortunately the focus of the GM and the employees of the stores is then on cutting and not selling. Employees spend their time cutting and the pursuit of customers seems to be not so important.

These administrators force the GM to reduce inventory because “it is not justified”. Business dictates inventory levels right? To these administrators it does. Due to the recession sales have dropped but rather than focus on ways to improve sales (promotion, advertising, financing etc) they take away stock in trade. In the car business nothing turns off a shopper like a sparsely stocked lot. Typically customers will drive by a sparse lot and stop at the lot with a large selection.

Here’s a direct quote from a numbers guy:

  • “The number [referring to gross per employee or some such statistic] just tells you, you have too many people for what you are producing.”

This makes sense if you believe that the dealership is capturing all the business possible. That is if everyone is focused on selling and advertising and inventory levels are adequate he would be right. To sell a car you need people. We are not order takers. If people came in and demanded to buy cars I would say his statement would probably be right. However we need to ramp up for business, and if we aren’t interested in doing business, shut it down. Otherwise let’s get to it and sell something. In one store they cut the staff to 12 people! Can you run a dealership with 12 people? Yes, if you don’t need to sell anything.

The GM running the 12 people store was recently replaced. Why? Because he just couldn’t make money with the very small inventory, very small ad budget and 12 people. Could you?

When the administrators eventually replace the GM the replacement may have to operate under the same constraints or not. Typically the new guy will flounder until he wins some relief from the constraints which almost always happens if they are even slightly assertive. If the new guy gets what he wants, he improves things and is dubbed a better car man than his predecessor.  The only way a GM stays in the store and weathers the storm is to stock the store with people and inventory and sell cars, service and parts.

The point is that when cutting expenses remember; without sales, no amount of cuts will work. Without continuous push for sales the last cut is locking the doors.