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Scott Norman

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Today’s Hot Topic: Expense Control

Hot topics for Twenty Groups change as much as the seasons change. Recently, the hot topic has been expense control. I decided to recap some ideas that have been discussed over the past few years at some of my meetings in hopes they might refresh your memory or provide you with a different approach to expense control.

As we all (should) know, at a profit to sales percentage of 3%, $1 saved is worth $33 in sales. For instance, if you spend $25 on a policy adjustment the dealership must sell $833 to cover that expense.  The table below shows this impact at several levels of expense:

coins

   Expense Dollars      To Cover Expense  
$5 $166
$50 $1,667
$100 $3,333
$250 $8,333
$500 $16,666

Payables Meetings

Pick one day a month for your meeting with all department heads. Have the payables clerk provide you with the payables folders or invoices for all the checks you will sign during the meeting. As you sign each check, discuss whether the expense is a necessary one and if so, would another vendor be able to provide the same service at a better price.

Vendor Book

Create a book of all approved vendors and establish the policy that any purchase of supplies or services covered in the book are purchased from only those vendors. You also want your payables personnel to review all invoices to be sure the approved vendors continue to use the pricing they quoted when the original bids were taken.

Charitable Request Form

Create a form that each solicitor for a donation must complete for their request to be considered. Only the serious solicitors will take the time and effort to complete the form and return it, thus discouraging “drop-bys.”

Expense control begins with being aware of what goes on in your dealership. For example:

  • Open your mail. Frequent questioning of payables will reveal some “sweetheart” purchases. Review all invoices.
  • Review petty cash receipts.
  • Get bids on everything. (See Approved Vendor Book above.)
  • Invest all excess earnings into new vehicle inventories through your cash management account.
  • Don’t give up on fixed expenses. Simple water, compressed air and heat leaks can
    be plugged. Ask your insurance carrier for a print out showing your reserves for past liabilities.  These liabilities may be obsolete and costing you premium dollars. Review all of the “named perils: for which you are covered to determine if there are any from which you may be virtually risk free.
  • Review your computer hardware maintenance coverage. Is it cost effective considering the cost of replacement equipment? PS never cancel the maintenance on your computer’s CPU.
  • Never give anything away. Charge something for everything. It may surprise you to know that a customer who is clamoring for a 100% adjustment will pay 25% and be entirely satisfied.  If you do have to give 100%, do it loudly. Let everyone know you gave something for nothing.

To involve your employees in expense control, consider taking the agreed upon forecasts and offering all employees a percentage of every profit dollar over that forecast as a bonus in equal portions to each employee. This should make everyone very profit and expense conscious.

Lastly, be consistent in your expense control awareness. Don’t make it a hot topic one month and not the next. One of the many tools available in NCM’s axcessa™ program is the ability to trend and drill down into expenses.

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About the author

Scott Norman

Scott Norman

Scott Norman began his career in the automobile business at a Kansas City area Ford Dealer Development dealership. He came to NCM Associates, Inc. in February 1988 after 15 years in the retail automobile business, where he held positions as Controller, and Parts and Service Director. During his retail years he was also an independent consultant, specializing in accounting and fixed operations and as an instructor for the Chrysler Marketing Institute. Today, Scott works with both dealer and manager 20 Groups. With his background in accounting, fixed operations and training, he brings a unique combination of operational experience and analytical skills to his clients.

Permanent link to this article: http://blog.ncm20.com/2013/11/todays-hot-topic-expense-control/

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