Issue link: https://read.dmtmag.com/i/743349
www.PowersportsBusiness.com SOLUTIONS Powersports Business • November 7, 2016 • 37 Let's be honest, we all have extremely busy lives. We mul- titask and move so quickly that all kinds of things slip through the cracks or get eas- ily overlooked. That even tends to be true when it comes to our dealer man- agement systems (DMS). Tasks are done in a certain way, and there seems to be no time to learn anything new. This is even true when we know it could help us make better and smarter decisions in our day-to-day jobs. Your dealership's DMS and accounting software should allow you to run a balance sheet and a profit and loss report (together they are a financial statement). You may be thinking, "Yeah, we got them, so what?" Truth be told, many dealers get these statements and never even glance at them. They sit in a stack on a desk, and dealers may only take a glance at the net profit. That is crazy! A financial statement is criti- cal to your dealership's success. Here are some things you can learn about your business from this statement: Debt ratio — What you owe (debt) against what you own (assets) Current ratio — Can you pay your short-term debt? This measures current assets against current liabilities. Income year over year Expenses year over year Inventory value month over month The number of inventory turns Each department's results I could go on and on. There is so much amazing information in these financial state- ments, but it is a matter of you reviewing and analyzing them. Take the time to do this, and you may begin to see anomalies or areas that need better controls. Another critical success factor is customer retention. Are you maintaining your customer base? A customer retention report should show you whether your customers are returning and how often by being able to filter a report by a specific date range/time period or by a specific type of sale. The report will tell you which customers have returned and those who have not. Acquiring a customer costs you 5-10 times more money than retaining a customer, so work to keep the ones you have. A daily operating control (DOC) report also simplifies certain dealership information. This might allow you to look at previous and current information and different date ranges; having goals with the report would be great. Hopefully your DOC report allows you to see each department at a glance using a bar graph or some other type of chart. A lot of dealerships take time to review and analyze their sales/finance numbers, but not as many look at the parts department. There is a wealth of information in the parts department. Hopefully your DMS allows you to report on the information stored in your system. A good parts report will give you information such as the number of invoices cashiered, dollar value of those invoices, discounts and the margin percentage. You may even get the average of the invoices or the average of the discounts. Use your reporting features extensively. Imag- ine quickly seeing the average discount for the day. That's powerful information to better manage your business. Another critical area to be mindful of is parts inventory. You should be able to report on the value of your inventory, looking at the value month over month. Calculate your inventory turns. You should have three or four inventory turns per year. How many have you had? Take the cost of goods sold (COGS) divided by the average inventory for a specific time frame to calculate the inventory turns. Average inven- tory is calculated by beginning inventory plus ending inventory, then divided by two. You can also calculate the number of days to sell your inventory. If you take 365 divided by the num- ber of turns, this will tell you how long it would take to sell your inventory. Ordering smart is imperative. Your DMS likely has different ways to set up your system for ordering. Some people order based on what they sold the day or week before. Some will reorder based on what is in their heads. Many reorder based on minimums and maximums. Reordering everything based on any of these can be a big problem. You should be looking at your historical data and adjusting as needed. Parts can be ordered and received quickly. Therefore, having a high-dollar inventory is not necessary. Remember, you own your inventory. It is paid for in full. If you have $900,000 in inventory, depending on the size of your dealer- ship, you probably have a lot of obsolete parts and low inventory turns. Being smart with your inventory means being smart financially. Let's not leave out the service department. Besides looking at net profit, the dealership needs to be analyzing technician statistics. Far too often the dealer has no clue what his or her techs are doing and how they are performing. It is not just about how efficient they are being, but also how productive and proficient. How is each one of these items calculated? Your DMS may do it for you, or you may have to do it manually. If you have to do this manually, here is how each item is calculated: Efficiency: Number of hours billed vs. actual time on job. For example, 2.00/1.25 = 1.6 (1.6 x 100) or 160 percent. Productivity: Actual time on job vs. actual clocked in time at dealership. For example, 1.25/5.00 = 0.25 (0.25 x 100) or 25 percent. Proficiency: Number of hours billed vs. actual clocked in time at dealership. For exam- ple, 2.00/5.00 = 0.4 (0.4 x 100) or 40 percent. When looking at technician data, many people just look at the efficiency number. Yes, it is great that a technician is 160 percent efficient. But they are not always productive or Make sure you're not too busy for stats FOLLOW ME Make sure you're not too busy for stats PAULA CROSBIE See Paula Crosbie, Page 39