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.

Auto Dealership Group Used Vehicle Department Objectives

This blog post originally appeared on our Auto Dealership Group Management blog.

Last year I rolled out what I considered a simple and effective objective for the Used Vehicle Departments in a large dealership group. I was addressing a room full of dealership General Managers (GMs) and Used Vehicle Department Managers (UVMs); about 60 people. My aim was to let our dealership teams know what was expected of them with regards to gross profit.

The crux of the presentation was to set an objective that each car should contribute 10% of its cost to the dealerships gross profit in 45 days. Basically to state it conversationally, our inventory age and gross per unit expectation was:

“If you are going to take the full 45 days to sell the car, I want to see a 10% (of cost) gross profit ($1,500 on a $15,000 car) in the till. If you turn it in 23 days, I’m satisfied with a 5% gross profit. If you are going to drag it out to 70 days, I want 15%.”

The constraint was lot space, not the target percentage. I wanted them to know that if they wanted to sell volume, it would be fine if they had a lower GP% target. That is, if your average turn is 20 days, $750 gross profit on a $15,000 unit is fine.

I had more than one GM tell me it was complicated so I drew him this:

My objective seemed unusual because most believed that, in practice, after a certain age, a vehicle’s expected gross profit drops (or at least that is what most of them experienced).

Its true though, when a car doesn’t sell in 45 days we feel we most likely screwed up somewhere in the process of stocking and selling the car. But maybe not. If we didn’t screw up then why didn’t the car sell? It could be any number of factors such as:

  • The vehicle wasn’t in pristine shape. That is, something was wrong with the car that kept customers from offering us top dollar for it.
  • The salespersons involved in showing the vehicle didn’t use their best selling skills nor did they always follow the approved selling strategy.
  • The Desk Manager didn’t use their most aggressive negotiating position in working offers up to the 45 day mark.
  • The car wasn’t well represented on the internet. That is, it wasn’t described well or the photos weren’t good enough to get the car on the customer’s short list.

One factor I didn’t include in the list is that the car wasn’t “right for the lot”. In the days before internet marketing I would say that could be a big factor; not so today. If you have a new car franchise, then your lot is fine for most cars you want to stock and market on the internet. I say most because, even though your lot may be a good place to sell all vehicles, your staff may not be skilled enough to represent Lamboghinis and Ferraris.

So the same graph above may actually, in practice, look like this for some dealerships:

If a UVM experiences a relationship like this, it does not prevent him from meeting our expectations, it simply compels him to make sure all units are sold prior to the 45 day mark. If, for some reason, he keeps a car beyond 45 days, he knows he is expected to make a home run on the eventual sale of the unit.

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.