Does your dealership have a purchase order (PO) system? Often when I ask this question in dealerships the answer is, “Sort of.” When I dig deeper, I discover this could mean that POs are opened but never really closed out, or they’re attached to things but nobody has verified them. The worst-case scenario is when repair order (RO) numbers are used instead of PO’s.

If this sounds like your dealership, let me explain the error of your ways.

One time while I was at a dealership, I saw a NAPA Auto Parts truck pull up. The parts delivery guy went straight into the shop to a technician’s bench. He handed the tech the part and a slip of paper and walked away. In this particular instance, it turned out the tech was putting the part in his own car, and he threw away the invoice. A purchase order was never issued for the part. The tech simply gave NAPA a RO number. Not even a real RO number, but a 5-digit number that he made up that he knew would work. And he knew the NAPA guy so he told him to just deliver the part directly to him.

I’m not saying this happens a lot but it could happen if you don’t have a solid PO system in place. For one thing, why wasn’t there a PO? Why did the NAPA guy deliver the part to the technician instead of to the parts counter? Why did the NAPA guy hand the invoice to the technician? None of these things should ever happen.

Dealers, if you want to have a really good handle on exactly how much money is going out the door and what it’s being spent on, you need to have a PO system in place. It’s not just the parts department where mistakes happen. In sales, purchases are made from vendors and the salespeople will just use a deal number or put their initials on the invoice.

The problem is, monthly invoices from vendors come into the office and they get paid. Accounts payable is supposed to verify every single charge, but do they? Often there’s no purchase order attached to the invoice. How do you know the invoice is legitimate? How do you know if the charge was authorized, and by whom? Accounts payable might place the calls to verify charges, but not all calls are returned. As the invoice due date approaches, it’s easier to just pay the invoice. Office employees are busy, after all.

Here are best practices for a PO system:

Purchase orders should only be issued by a department manager or assistant manager. No matter who issues them, someone else should authorize the PO with a signature. I recommend this because a PO is basically like a blank check. You really need to know who is signing your checks, therefore an authorized signature is required on every PO.

Purchase orders should always include the correct dollar amount for the item purchased. If you don’t know the amount, the amount should ALWAYS be $10,000. If it’s $0 the amount may never get filled in. If it’s $10,000 someone will be forced to adjust the amount before it’s processed.

Printed copies of purchase orders should always be given to the vendor, in addition to emailing it to them.

When the vendor sends an invoice, the department manager or assistant manager should always attach a copy of the PO to the corresponding invoice before turning it into the accounting office.

Require that all parts must be delivered to the parts counter, not directly to the service bays.

Send a certified, registered letter to every vendor you work with that states that every order must have a signed PO attached to it. Ask them to retain copies of all your purchase orders. Also let them know the series of numbers that every PO should have; e.g. all of our PO’s start with the number 567-. Then let the vendor know that your dealership will not pay any invoice that does not have a valid PO number on it. It can’t be Jim’s initials. So, then it’s up to the vendor to say to Jim, sorry Jim, I need a PO number.

Before paying an invoice, Accounts Payable must match every single charge on the invoice with the corresponding purchase order. If there’s no purchase order, the invoice doesn’t get paid.

The first time a vendor doesn’t get paid because there’s no PO number on their invoice, or they didn’t require a PO, the problem will be fixed immediately.

That’s how you implement an efficient PO system, so you can keep better track of your expenses, reduce the chance of theft and reduce unnecessary, wasteful spending.

Recently I was in a dealership and heard a service advisor answer the phone. A customer called and asked about a problem with their vehicle. “What kind of noise…grinding?” the advisor asked. “Hmm, it sounds like it could be your CV joint…oh I’d say around $400 to $500, in that range. Why don’t you bring it in and we’ll take a look?”

I’ve heard variations of this conversation hundreds, if not thousands of times, and every single time it sends me over the edge.

Let’s be clear. It’s impossible to diagnose a repair over the phone, when all you’ve got to go on is the customer telling you what they think it is…or even worse, making sounds over the phone.

What’s “grinding” to a customer may actually be “whining” to a professional. The problem could be a dozen different things; anything from a pebble lodged between a brake pad and rotor, to a cracked belt or a failing alternator.

The cost of the repair could range anywhere from $100 to $1,000 or more.

I understand why customers want service repair quotes over the phone. Some people like shopping around for the best deal. If they’re calling to get a quote for a very specific type of service, you might think that’s OK but I still discourage giving any service quotes out over the phone.

More often than not, the customer doesn’t know what’s wrong with their vehicle. The problem with diagnosing problems and giving blind estimates over the phone is that when the customer brings in the vehicle, they expect the RO estimate to be what was quoted to them. Then lo and behold, you discover the real problem and the quote doubles or triples in price. Now you’ve got an unhappy customer. 

Here’s how the conversation should go:

Customer: “Hello. I drive a 2010 Ford Edge and it’s making a squealing sound when I press the brakes. I think the brake pads may need to be replaced. Can I get a quote?”

Service advisor: “Thanks for calling, yes absolutely. First, can I get your name and phone number in case we get disconnected? OK thanks, and do you happen to have the VIN number on you? OK, thanks. Well, to be honest a sound like that could be a couple different things and I’d hate to give you an estimate that’s too high. I can’t give you an estimate over the phone but we’re be more than happy to take a look at it, can you bring it in?” Then, suggest a time.

Sometimes a customer knows the problem and asks for a quote to get it repaired. Again, start by getting the customer’s information and VIN number. As we know, giving an estimate isn’t always as straightforward as it sounds.

Customer. “I need the front brakes replaced on my 2017 VW Jetta. How much will that be?”

Service advisor: “Well, it depends. Do you need the pads and rotors replaced? Do you need the calipers replaced and do you need a brake flush?”

If you have to, you can say something like “Without seeing your vehicle, an estimate on this job would be this amount. But I have to give the disclaimer that without seeing the vehicle, it could be substantially more or substantially less than what I’ve just quoted.”

Finally, if you do quote a service repair estimate, document the quote along with all the details, and store it in the customer’s record in your DMS. If you don’t have a customer record, create one because you never, ever quote an estimate without getting the person’s name and phone number.

Documenting the estimate is very important so the conversation and price quote can be easily recalled by any other employee that’s deals with the customer. You don’t want a customer bringing in their vehicle and another service advisor quote them substantially less or more for the same service, than what they were quoted over the phone!

It’s simple, common sense guys and gals. Don’t give blind service repair estimates over the phone. If you feel you have to, make sure you include a big disclaimer and explain why. And always, always get the customer’s name and contact information so you can follow up the next day.