Article: 5 Signs You Have Outgrown Your Current System
Most successful dealerships require some sort of system to effectively track finances, labor, inventory and countless other variables. Plenty of computer programs seem to get the job done, with QuickBooks being one of the more popular choices among dealerships.
However, many systems have adopted a “one size fits all” mentality, meaning that they aim to please every business at once – from hair salons to accounting firms – and thus tend to lack specific features. Individual companies have their workarounds, but those often lead to costly errors and inefficiencies.
Even if you’re running a small dealership with just a handful of people, you’re bound to have plenty of errors and inefficiencies, which will only multiply as time passes – and so will the costs. You need to be prepared for that.
Here are some of the most common issues facing dealerships that use “one size fits all” software:
1. Inventory Checks are Costlier Than Ever
So, if you have $300,000 worth of equipment from a particular manufacturer, you’re probably used to seeing floor checkers come in to take a look at your inventory. You may also be used to writing big fat checks to make sure you cover every piece of equipment sold – without fully knowing how much you actually owe because your current system doesn’t show you that.The majority of “one size fits all” systems don’t offer any kind of floor planning, which means that you can’t adequately tell what your true costs are against each unit, which unit is the oldest, so you can sell it first, and how much you owe to the supplier.
You should never feel like you’ve been blindsided by a floor checker. But for that, you need a system in place that lets you easily single out the units you’ve sold, but haven’t yet paid for. This method lets you determine exactly how much you owe to the floor checker in a matter of minutes.
2. No Manufacturer Integrations
In most cases, a “one size fits all” system won’t let you submit parts purchase orders directly to the manufacturer, meaning that you have to either manually fill out a purchase order on their website or send them an email or a fax.
Furthermore, a generic system won’t let you cross-reference parts. For instance, you can’t tell if parts from one manufacturer are compatible with parts from another manufacturer without doing extra research. The same applies to determining whether an older part can work with newer equipment – or vice versa.
All of this can be incredibly time-consuming, particularly if your dealership works with plenty of suppliers, and worse yet, even a tiny mistake can cost you money.
3. No True Shop Management Tool
The more service technicians you have, the more difficult it is to track their efficiency. One of the most common ways to track that is by looking at the work order to see how many hours they’ve spent on it and reconcile that with the revenue generated.
The problem with this method is that it can be very imprecise. For instance, you can’t be a 100% sure that the amount of time stated in the work order is actually accurate since in many cases, it’s just an educated guess. You also can’t clearly see how profitable your employees are without doing several manual calculations.
The simplest way to calculate worker efficiency is by relying on the following formula:
So, if you’ve decided that repairing a Briggs & Stratton engine should take about 4 hours, but your employee has taken only 3 hours, then his/her efficiency is ~133%:
Dealership expert Bob Clements states that techs must operate at 75% efficiency just to break even and need to be operating at a rate of 85% or more to be producing any real profit for your business.
Measuring employee efficiency this way can take a lot of time if done manually, which is why many dealers who rely on a “one size fits all” system don’t do it. As a result, they are likely spending more money on labor than they should.
With the right software, you can check out how profitable your techs are individually or zoom out to see how profitable your service team is as a unit. In addition, you can time each employee from the moment they start a particular job to the moment they complete it.
4. Too Many Part Number Errors
Many “one size fits all” systems – like QuickBooks – don’t automatically generate complete part information for purchase order forms, which means that dealers have to enter all this data manually, including:
- Part number
- Part description
- Supersede of the part number
- Manufacturer’s suggested retail price
- Invoice cost
- Sophisticated pricing matrixes by customer types
Manual entry is both time-consuming and error-prone. For example, if a particular part number doesn’t match what the manufacturer has on file, then there is no way for them to know what you actually need – especially if you haven’t provided any extra information. You would then have to spend additional time on redoing the order.
We have discovered that in some cases, up to 50% of what dealers order is not accurate.
5. Warranty Claim Reconciliation is Too Complicated
“One size fits all” systems also require plenty of manual input when it comes to filing warranty claims.
For starters, you can’t create one work order with two portions to it – one that would go to the customer to pay and one that would go to the supplier as a warranty claim. Because of this, you have to duplicate your efforts every time, which is quite a bit of work.“One size fits all” systems also require plenty of manual input when it comes to filing warranty claims.
Secondly, most generic systems don’t provide you with the ability to automatically reconcile warranty claims, which means that you have to manually hunt down each claim to figure out how much you’re owed.
This method of reconciling warranty claims is far more difficult than it needs to be – and many dealers tend to either spend too much time processing warranty claims or fail to complete them altogether, letting money walk out the door.
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Think You’re Ready to Move on?
When you realize the shortcomings of your current system are costing you more money and time than they should, then it’s time for an upgrade. Your best bet is to stop looking at generic solutions and start researching dealership management systems designed specifically for your industry.
We designed Ideal software with feedback from hundreds of dealerships, so you may want to start your research start your research right here and find out if our solution is right for your business.