Expense Control…Time to Buckle Down

If there is one thing I’ve learned working in the car business over the last 20 years, it’s that bad habits develop during good times, and good habits develop during bad times. We’ve had some pretty good times over the past few years, except for not having much inventory to sell. But the outlook isn’t as bright for the near future, so it’s time to re-focus on building good habits and dive into examining expenses as profits begin to come back down to earth.

Check out this list of possible ways to reduce expenses:

1. The first thing you must do is track expenses monthly, either with your DMS, a DOC report, or a spreadsheet.
2. Right size your staff to your current volume level.
   • We all want to sell more but holding on to extra staff in the hopes that volume will improve can be a very expensive gamble.
   • Cross-training your staff to help cover other duties can be beneficial for coverage and the bottom line.
   • Many dealers have the same support staff they had when the volume was much higher.
   • Consider part-time positions. Do you have full-time employees who move to part-time?  Do you have part-time positions that could be dismissed?
3. Consolidate Purchasing
   • Who is allowed to buy what?
   • Make a list of all your vendors and the last time you shopped your prices. You’ll be amazed at how many you have and how long it has been since you compared.
   • Consolidating vendors may lead to deeper discounts.
   • Consolidating purchasing to one individual and shopping prices amongst vendors can be highly effective.
4. Adjust for inflation
   • Have you adjusted your shop supplies for inflation?
   • When was the last time you requested a warranty labor rate increase? Many dealers are seeing huge pick-ups due to inflation.
5. Open the mail
   • Other than your factory open account, almost all bills will come in the mailbox. It’s a great way to get your fingers on the pulse of expenses.
6. Co-op
   • Due to the lower volume of vehicles coming in, many dealers have vendor charges that used to be covered by co-op that are now a direct expense.
   • Make sure you are maximizing every co-op dollar.
7. Sign your payables checks in front of your department managers.
   • This keeps them close for when you have questions and raises their awareness of the total costs.
8. Credit cards usage
   • Who has them?
   • What are their spending limits?
   • Often, credit card purchases are more discretionary than they should.
9. Credit card fees
   • When was the last time you shopped your credit card vendor?
   • Most dealerships are taking credit cards more than they ever have.
   • Do you have a maximum amount that you will accept via credit card?
10. Unpaid/unapplied rental car charges
    • Extended parts delays have caused many customers to be in rental cars longer than the allowed reimbursable time. Who is paying for the extra days? You or the customer?

Developing habits to control your dealership’s expenses is a smart way to ensure your business continues to prosper well into the future. Reach out to your Brady Ware Dealership Advisor for assistance.