Thankfully NADA is back in person this year, and that gives all dealers a great opportunity to meet face-to-face with their vendors. Many traditional best practices have taken a back seat to widespread worries over inventory and hiring – like vendor reviews.

Yet, regularly reviewing what you’re paying for and what you’re getting in return could uncover duplicate services or lackluster results that once resolved could save thousands of dollars every year.

You can bet your vendors are eager to meet with you at NADA, so now is the time to prepare.

Best Practices before NADA

• Get started by compiling a comprehensive list of all your vendors – from lead providers to your CRM, websites, and pretty much anything else you’re paying for. Pull a report from your check register or run a DMS vendor report.
• Find and review contracts and create a spreadsheet with contract renewal dates. Many dealers are moving contracts to a third-party document management platform, which makes a lot of sense. Instead of digging through paper files, it only takes a few keystrokes to create spending reports and stay on top of auto-renewals.
• Look for extraneous vendors and duplicate services. You may be paying for a service that your OEM provides for free. Or paying two companies for the same marketing services.
• Audit every vendor for ROI, using your own statistics. Don’t blindly trust what a vendor tells you about its performance.
• Contact vendors you want to meet with at NADA (they’ve likely already reached out to set-up meetings), and schedule a time to meet.
• Research alternative vendors if a particular service or product doesn’t seem to be delivering for you. Contact these vendors and schedule a quick meeting and/or demo.
• Create a list of questions and/or concerns you want to make sure to discuss.

Best Practices during NADA

• Arrive at vendor booths armed with your list of questions and KPIs.
• Be prepared to voice your experience, whether good or bad, and give vendors a chance to correct problems. Obviously, improvement will not happen on the show floor, but it sets the stage for vendors to improve quality moving forward. You don’t want to go through lots of vendor churn, so it’s important to save relationships when you can.
• Don’t be afraid to ask the tough questions, such as: What are you doing to advocate for great customer service? Or, what is your procedure in the event of a ransomware attack? Or, what happens to our data if we switch DMS providers? Your vendor may not have all the answers right away, but after the show they will certainly follow-up. Those who don’t may be signaling your business is not that important to them, and so you’d be better off researching competitors.
• Finally, be prepared in the event you decide to terminate a vendor. While this is not likely to happen on the show floor, a clean exit strategy can prevent potential problems down the road. Consider a termination checklist that details what you expect from the vendor, such as returning all collected data and relinquishing access to software systems. A termination process will smooth vendor transitions.

Vendor management is arguably more important than ever as dealerships seek to do more with less. It’s easy to forget with so much change and disruption in our industry, but a hard look at your vendors can save you money and get you better performance. A return to an in-person NADA show is a great opportunity to meet face-to-face and ensure your current partners are your best option moving forward. Start preparing today!

Growing up in the 80s, I loved the A-Team. I thought they were the coolest; even the van was awesome! Ultimately, what made them great as a team was that they worked better together. The "better together" philosophy can easily carry over to a different A-Team: the "Accounting Team.” It simply makes fiscal and operation sense to round up your team and transition to centralized accounting.

Getting your house in order and bringing everything under one roof will help you weather industry ups and downs right now. The coronavirus is still a threat, several manufacturers just announced production interruptions, and no one knows when things will get back to “normal" (if that even exists anymore!).

A hub-spoke system for your accounting team, where the majority of office staff are in one location and each store has one accounting support system, delivers more common sense benefits.

Efficiency and consistency

Nothing makes a controller's heart happier than a quick and streamlined month-end close. When you are operating locally at every dealership, you are at the discretion of the controller of that store. Working centrally, you can implement the same time-saving processes at each location. Payroll, accounts payable, inventory management; all can be streamlined by removing redundancy.

In addition to time-savings, you gain consistency because everyone is following the same processes. Operational errors, and the risk of something being “swept under the rug,” are both less likely. Centralization helps staff do their jobs better, which improves morale and helps fight employee attrition.

Precise document management

Every stores' month-end data, reports, and physical documents must be properly stored to meet all regulations and protect you in the event of an audit. A centralized accounting office follows the COLDing process more consistently because employees work together in a more coordinated effort.

Also key to breezing through audits is proper scanning of sales and service documents. Managing entry-level employees at each location to scan can be difficult. Mistakenly piggy-backing documents together, missing items in a deal jacket, or creating unreadable scans can all have a direct impact on your bottom line and the liability of your dealership. Consolidating scanning in one place gives you more control over the process and the peace of mind that a trained professional is safeguarding critical information. Most of this information requires to go through accounting any way (think warranty processing and deal postings); why not take this time to scan it?

Effective vendor management

One of the more difficult things to control as you scale is the hundreds of vendors. Keeping track of each agreement can become basically impossible if you have the autonomy for each local store to have control. Additionally, you can bet that you'll end up with redundant vendors or inconsistent pricing structures.

Centralizing vendor management gives you more power to negotiate better contract terms, weed-out duplicates, and gives you the data you need to pinpoint and cut loose vendors with lackluster results. Centralization also eliminates the frustration of a store auto-renewing a contract that you’re now stuck with for another year. Every contract in the group passing through the same approval process will lead to improved bottom lines and better protection.

And don’t forget your DMS. Consolidating your general ledger may lead to a substantial reduction in your DMS bill.

Over countless episodes, the A-Team proved they could get more done together than by working alone. That lesson applies to your accounting team. When you centralize accounting in one location, you increase efficiency, accuracy, and save money.

As the fable goes, a frog put in a cool pot of water that is slowly heated will happily hang out until its eventually cooked. The gradually changing temperature fools it into thinking conditions are not changing. When it comes to your DMS provider, you cannot be complacent like the frog.

There are many great providers out there who deserve your loyalty, but the DMS space continues to generate headlines with more acquisitions and consolidations coming left and right. You’ll remember DealerSocket bought Auto/Mate last year, only to be acquired by Solera this year. That was the second acquisition for Auto/Mate in just two years.

And they’re not just buying each other. Many are snapping up third-party providers too. Back in 2018, CDK dropped over 100 members of its support staff to, as its managing director stated, “align itself with a growth strategy,” then announced it was acquiring Elead.

This past spring, CDK bought Roadster and R&R bought Gubagoo, to offer digital retailing tools to existing customers. The cynic in me has to wonder if in the future these big guys will require their dealer clients to use the platforms they now own.

With so much movement in the space, it’s prudent to keep a keen eye on your DMS vendor. After all, although vendors talk about putting customers first and wanting to be your “partner,” they are businesses with balance sheets to monitor, and in many cases, shareholders to please. 

Don’t get me wrong; change via acquisition or consolidation is not always bad; these can lead to increased functionality or value. What is bad is when it catches you off-guard and a provider you considered a “friend” gradually introduces new ways of doing business that don’t work for your dealership.

As with any relationship, you should be cautiously aware of warning signs. Even if everything is great today, be vigilant of your DMS changing in the following ways:

• Change in contract terms – DMS vendors will always push for a longer contract length - that's just good business for them. You should be alarmed if the DMS forces longer contract terms, without an off-setting benefit to you, like lower prices or increased services. Don't be forced to scratch their back without them scratching yours.
• Deviations in support – CDK likely cut support employees before acquiring Elead because it needed to trim payroll or because workers were redundant. Either way, deviations in the level of support is a signal that change may be coming.
• A new primary strategy – Most companies have a primary business strategy, such as cross-selling more products, offering the most innovative tools, or delivering the best support. A company moving away from stellar support and toward pushing more products, for example, is an early sign they are prioritizing revenue over customer satisfaction.
• A change in leadership –Be on the lookout for executives moving from one DMS to the next. Those executives will be bringing their playbook along – and may implement many of the negative company practices you have been trying to avoid.
• Changes in product offerings – CDK and R&R saw market openings when they purchased digital retailing platforms, especially since the pandemic sped up dealerships’ adoption of technology to power remote selling. There’s no harm in offering more products. The harm comes if vendors require customers to use those products.
• Restricting third-party vendors – Dealertrack DMS and others make a big deal about allowing dealers to work with preferred third-party vendors. Starting to restrict certain vendors is the flip side of requiring certain vendors. Be wary of both strategies to restrict how you run your business.
• Changes in data retrieval – Some vendors have a reputation for essentially holding a dealers’ data hostage if they try to make a DMS switch. If your vendor starts to get cagey about how you retrieve data and/or how much it will cost, that’s a red flag that a change you may not like is possible. Be straightforward and ask the cost outright; if your vendor can't give you a straight answer, be wary.

Now for the good stuff. There are plenty of vendors in the market who exhibit integrity and best practices that put dealers first, even if these vendors are interested in being acquired.

A DMS to stick with may exhibit these signs:

• Offering more products – A DMS that is continually innovating to bring you new products is working for you, not against you. A good partner DMS will educate you; not upsell you.
• Integrating more third-party vendors – You should be able to work with companies that are best for your business. A DMS that understands that and works to create new relationships with third-parties is good for your business.
• Contract Flexibility –A DMS that doesn’t push contracts understands continual improvement, stellar functionality, and hands-on support, are required 24/7 to keep a client base. They work harder to keep you happy, which only benefits you.

As the DMS space continues to generate headlines, it’s smart to remember the fable of the frog and stay vigilant. Change can be good, but only if you’re aware of it and on-board. Otherwise, you may end up with a solution that is no longer a best-fit for your dealership. 

Service warranty audits are back – some dealers say with a vengeance, according to a recent Auto News article. Others consider the return of audits, now that the pandemic has eased, to be business as usual. Why do some dealers find it easy to stay on top of compliance while others panic when a warranty auditor sends them notice?

I’d suggest it’s largely a matter of process and document storage. We all know the warranty-claims process is still very paper-intensive - which can lead to lost documents. Dealers who don’t have an iron-clad process for electronically managing their documents are putting themselves at risk. As a dealer once told me, “They might as well grab a gallon of gasoline and burn it all.”

To further complicate matters, these past 15 months have caused a total disruption in day-to-day operations: people have left the dealership, COVID-precautions have changed long-standing processes, many dealers have tried to implement electronic processes to compliment the overall document process, with varying degrees of success. I think it’s safe to say manufacturers understand the situation and may be looking to capitalize on it.

Manufacturers know these changes have increased the likelihood things are slipping through the cracks. The increase in audits are the natural result of that likelihood. If you aren’t prepared with a document management process that has strong checks and balances, you are setting yourself up for failure.

You can get your house in order and turn warranty audits into no big deal. Here’s what I suggest:

1. Train service employees and hold them accountable. You wouldn't take a road trip without a map. You cannot hold your team to a process if that process isn't written down and clearly documented. The warranty process is complex and service and parts employees must be properly trained on documenting hours and repair work. Just one employee not following the process could cost your dealership thousands of dollars. Properly trained employees should have no problem following a “no exceptions” process for paperwork and for warranty work. It’s fair and prudent to tell new hires that committing warranty fraud or performing unnecessary work will get them fired. No warning and no second chances.
2. Invest in electronic document storage. Overflowing filing cabinets and stuffed document boxes are a recipe for disaster. Just one missing document could cost your dealership an expensive chargeback. Web-based software that allows you to scan and store documents electronically is a simple solution with a big payoff. All documents are instantly available with a quick search which allows you to compile required auditing materials in seconds instead of hours.
3. Hire a professional scanning operator. An electronic storage system is only as good as what you put into it. The old adage holds true: "Garbage in, Garbage out". Even the best storage system can’t compensate for sloppy scanning. It’s well worth the time and money to hire a detail-orientated professional and invest in training because proper document scanning is the linchpin of a successful storage program. The role has a direct impact on your bottom line and dealership health and should not be assigned to a low-level clerical employee. You can find tips for hiring a Scan Operator in my previous blog about the most important dealership hire in 2021.
4. Designate a compliance officer. Routine self-audit reviews are one of the best ways to ensure your program is compliant when an actual audit happens. Designate an employee as a compliance officer and task him or her with regularly (weekly or monthly) spot checking claims and pulling a few job cars to check for complete, accurate information. I’d recommend this person not be the service manager or warranty administrator to keep the process honest. You’re also adding to this person’s workload so consider extra compensation to make the job attractive and motivate proper actions. One idea is to award a bonus for a clean audit.

After mostly shelving the process in 2020, warranty audit visits are back. While automakers may be less forgiving this time around, that doesn’t mean you need to panic. Follow the four steps above to get your house in order and it will be business as usual when an auditor shows up at your door.

“Inspect what you expect” is a well-known business phrase that I think is particularly applicable to our industry today. That’s because many dealership employees have a LOT of time on their hands right now. Why not re-direct that time towards everyday tasks that you expect are getting done, but often don’t have the time to inspect?  

Our unprecedented market, with virtually no new cars on the ground and used cars impossible to come by, has left many dealership employees sitting idle. While experts predict vehicle supply won’t return to normal until the first quarter of 2022, you don’t want to let go of core staff because the market will calm down.

I have spoken with multiple dealers who are repurposing some of that employee downtime into completing useful but often delayed house-cleaning tasks. Will the employees probably complain? Sure. Is it a great use of downtime? Absolutely.

Here are six tasks to keep employees busy and, more importantly, help your dealership with organization, compliance, and safety:

1. Cleaning and organizing deal documents – When you’re busy closing deals it’s easy for business office and dealer forms to pile up and become disorganized. But in an industry as regulated as ours, you can’t afford messy paperwork. Have you staff audit some deals; ensuring proper signatures exist, certain forms exist, and the deals are organized a in consistent manner. A little TLC on your deal jackets will unquestionably lead to increased productivity when that deal needs to be reviewed in the future.
2. Scanning files – Instead of multiple filing cabinets, stacks of paper, and countless folders, now is the time to contract with a third-party document management company and go digital. If you already have a scanning department but have fallen behind on digitizing documents, now is the time to catch up. I’ve spoken with dealers recently who are temporarily adding scanning stations to clear backlogs. One word of caution: proper scanning requires some training. Every document in a file must be legible, in the proper order, and labeled correctly. Sloppy scanning with missing pages or illegible information could result in hefty fines if auditors come calling. Before re-purposing employees to a scanning station, conduct internal scanning training to keep everything on the up and up.
3. Validating OSHA requirements – Every dealer is required to have an emergency action plan to comply with OSHA standards, but when is the last time you reviewed yours or shared it with your employees? Assign an employee to review and validate your OSHA compliance. OSHA offers a free, on-site consultation program that can help take your safety programs to the next level if you find deficiencies. Additionally, audit your documents to ensure you have properly stored all the necessary employee documentation, like training certifications.
4. Validating Red Flag compliance – Every dealer is also required to have a written Identity Theft Protection Plan. Now is an opportune time to review and validate yours. Due to the changes in how consumers purchases vehicles caused by COVID-19, identity theft more than doubled in 2020 as compared to 2019. A thorough review and update of your plan is a smart move to protect your customers and also your dealership against fraud.
5. Conducting perpetual part inventory counts – Any employee can count parts during slow times. Assign each person a bin. Then, anytime employees have an hour or two of idle time, they can count their assigned bins. Regular physical audits are a boon for your bottom line because they reduce inventory costs from theft, waste, and obsolescence.
6. Spring cleaning – You may not be asking your employee to grab a mop per se, but it’s always a good time to do some deep cleaning. Check cabinets, desk drawers, closets – trust me: you'd be amazed where critical, auditable documents can end up!

Take advantage of the market slowdown by re-purposing employees to inspect and improve tasks and processes that are often put on the back burner during busy times. The payoff will be a better organized, compliant, and safe store that’s ready to hit the ground running when vehicle supply rebounds.

Floor planning is not a new topic; but it’s gotten a lot more interesting lately. As Auto News reported in a recent article, floorplan swung from a $96-per-vehicle-expense on average in 2019 to a $140-per-vehicle gain last year. The gains are attributed to slim vehicle inventories, low interest rates, and credits from OEMs.

Unfortunately, this is probably a one-time thing. OEM subsidies have died down, and gains made from new vehicle floorplans are going to be offset by high used vehicle floorplans.

We’re also likely looking at a permanent change in our industry when it comes to inventory. Many experts predict we’ll never go back to high, high levels of inventory and slower turn. I believe this is a good development for our industry. Excess inventory is a waste and accrues unnecessary interest expense.

With so many factors in flux, a hard look at your floor planning is in order. Get started with these proactive tips:

Audit your floor planning – Audit your floor plan lenders and interest rates. Record-low interest rates mean now is the time to renegotiate. Research what various financial institutions are offering and compare against your current lender. You may be able to get a better deal.

Beware of overleveraging on used cars – Sky-high demand for used vehicles has many dealers paying up to 120 percent of market value. That’s not a problem if you can turn those vehicles quickly for a profit. But beware of changing market conditions and buying the wrong vehicles. The market will correct as OEMs push out more new vehicles. Floor planning an expensive used vehicle that sits on your lot may result in a debt burden that wipes out any profit. Ensure you’re only buying your core used vehicles – those that turn quickly for higher than average profit – and be ready to re-price quickly if the market changes so you don’t take a loss at auction.

Monitor your curtailment period – It’s likely you pay interest-only on your inventory for a certain amount of time. After that, your curtailment period kicks in and you’re paying both interest and principal on the loan. Your curtailment period also runs for a certain amount of time. If that time runs out and the unit is still sitting on your lot, the lender has the right to demand full payment. It’s crucial to stay on top of these timelines. Miss a deadline and your costs can go up precipitously. This may not be a big concern at the moment but it will be when the bubble bursts.

Stay in trust with your vehicles – Selling out of trust can be a criminal offense, leave you vulnerable to civil litigation, and even cause you to lose your dealer license. Dealership groups that divert money away from paying loans and toward other business expenses may have grown too quickly or had poor cash management strategies. If you’re facing a cash crunch, one of the worst things you can do is let a few vehicle sales go out of trust and expect to make it up the next week. Experts know how quickly that can snowball. If you’re struggling, reach out to your lender first and see if they will work with you. Most will help guide you through difficult times. Going out of trust can also happen under the radar. An Auto News article reported on a dealer who went out of trust because his business manager quit and the replacement, new to the industry, thought it was okay to prepay trades and let the flooring loan float for a few days.

Research floor planning solutions – As a former Controller, I know how time-consuming managing floor planning can be. Excel simply isn’t up to the job. Take the time to research floor planning solutions that manage your data, and also help audit to ensure your balances match up. Nobody is perfect and a small discrepancy can become a big problem.

Our industry will always rely on floor plan lending to keep new and used cars on the ground. The uncertainties of today’s market present opportunities to manage and retool your floorplan to keep expense down and minimize risk as our industry changes.

A drive around town quickly identifies an odd reality: dealers’ lots are bare bones. It is honestly shocking how few new cars are on the ground. As new car inventory continues to fall, consumers are turning to used cars – putting a big strain on supply and driving up prices.

As a result, the average price of a used car increased by 12.5 percent between last year and this year from $21,020 in February 2020 to $23,643 in February 2021 according to NADA. That bump in price is great news for dealers – if you can find used cars to sell that is!

The market will calm down eventually, but it may take some time. As CNBC reported, chipmakers shifted their focus to electronics like computers when dealerships and OEMs shut down during the pandemic.

Now, those same suppliers are struggling to keep up with renewed demand from the auto industry. Ron Montoya, senior consumer advice editor at Edmunds.com, predicts that car pricing and inventory will likely be affected through at least the second half of 2021.

In the meantime, what’s the best way for dealers to source used vehicles? Finding vehicles is a challenge, and purchasing vehicles at auction is expensive and pits you against your competition and rental car agencies. Your best bet is to get creative in your sourcing. Here are a few ideas:

1. Create a “Cash for Not-So-Clunkers” Program. The 2009 Cash-for-Clunkers program was a success because it got consumers back in showrooms and jump-started new vehicle sales. You can use the same idea to boost used car inventory by encouraging consumers to sell extra vehicles that they are not using. Cash-for-Clunkers offered at least $1,000 for old cars that met eligibility criteria. Why not offer $2,000 for anything that runs? You can also advertise that you’re willing to pay over Kelly Blue Book value for a trade. I know of a dealer offering 120% over book value and consumers are biting. Consider even subsidizing some service work to get the vehicle in working condition. Even if the car requires some tech elbow grease, the premium mark-up on used cars will surely make up expenses incurred to get the vehicle in a sellable state.
2. Scour social media sites. If I was a used car manager, I would avoid the auctions and seek out individual sellers on social media sites. Facebook Marketplace and Craigslist are both good places to start. Approach sellers with an offer 10 to 20 percent over asking price and have a check in hand. In today’s market, you can finance or sell these cars for 70 to 80 percent of their sticker price.  
3. Call fleet companies. You can also circumvent auction houses and go directly to fleet companies. It’s hard to have qualms about a fleet vehicle that was used as a company car and driven normally. The cars generally will have higher mileage than a privately owned version of the same model, but they were likely serviced regularly and kept in decent shape. Fleet companies will gladly work with you directly vs paying a seller’s premium to the auction house.
4. Launch local marketing campaigns. This may be the only time in history when used vehicles are appreciating in value. That’s a powerful marketing message. Run a campaign in your local paper, TV, and on social media sites, that encourages consumers to cash-in during this unprecedented time and upgrade to a new vehicle at a lower interest rate. You may not have a new car on the ground right now, but you will. As part of your messaging, let consumers know they will be at the top of your waiting list and will receive regular updates about when their new vehicle will arrive.

These are some weird times: sky-high profits but only if you can find something to sell. Sourcing inventory means you need to get creative. Avoid paying outrageous prices at auction and instead think outside the box to get the inventory you need and ring up sales during this unprecedented time.

I believe the paperless car deal is the holy grail of automotive retailing. In my last blog, I talked about how e-contracting is the sticking point in reaching this ideal. The reason is two-fold:

First, car deals are complex and sometimes messy. There are a lot of vendors, systems, and individual variables involved in every single deal.

Second, the paper system isn’t broken. There is nothing fundamentally wrong with using paper - the majority of customers today prefer it! Even during the pandemic, the number of customers willing to complete a deal from start to finish digitally was a fraction of all buyers.

However, e-contracting offers a lot of benefits, including faster funding and a speedier process for customers. I think it’s safe to say that as customers progressively get more comfortable with technology and eSign platforms, more will want a paperless process. But not everyone will embrace change.

For example, my 95-year-old grandfather thinks it’s ridiculous that Ford created the Lightening. For him, gas is the only way to go. When it’s only digital one day, there will be a buyer that requires you to accommodate for paper. That being said, paperless is gaining a lot of steam with dealers and customers. There are several reasons why; two of the most compelling are cost and security.

Consider that a 100 deals a month generates approximately 27 boxes of paperwork. With a cost of storage around $2 per square foot, and each box measuring about 1.5 square feet, dealers storing paper documents spend over $900 a year to store a month’s worth of deals. Over the seven years required to retain deals, that cost balloons to over $6,300. For one month of deals!

When it comes to security, deals stuffed in filing cabinets and storage lockers are vulnerable to theft and loss. Deal jackets housed in the cloud by a third-party document management solution are protected by strict access controls, and secure cloud servers with firewalls and cybersecurity tools.

I think we all agree that e-contracting is the future of auto retailing and dealers need to position themselves to incorporate these tools. Still, putting an online system into place can be daunting. To sell in a paperless manner, each piece of the deal needs to work digitally. In order to do that, you need to understand what goes IN a deal jacket.

Breaking down deal jacket silos.

The DMS is going to sell how streamlined their product is and how it will facilitate a consistent process for every deal. That’s rarely true, because the pieces of the deal are siloed between multiple parties. Consider the breakdown of a deal jacket:

• Front-end Sale/CRM documents
• Credit application forms
• F&I desking product documents
• Office and accounting documents, including tax, registration, and incentive forms
• Government required documents including Title and DMV requirements (some states will not accept an electronic signature)

Remember: your customers view your dealership as one company, not a collection of separate companies or organizations. Sure, they may understand their loan, for example, is through a separate financial institution, but they still expect you to be the expert at point of sale. Utilizing numerous products to streamline your operational process has to be perceived by the customer as a single, cohesive process.

Breaking down deal jacket silos is extremely difficult if products do not implement with your DMS. In addition, who is going to manage each software platform and make sure each piece of the deal integrates with all the other pieces? Managing digital systems can become very complicated.

Tips for preparing for e-contracting.

Dealerships across the country have cleared hurdles and put e-contracting in place. A recent article in WardsAuto noted that RouteOne had 20,000 new and used dealers enrolled on its credit-application processing platform last year, including 9,000 participating in its e-contracting service.

I believe the key to success is proper planning for how to implement e-contracting because every sales tool, technology solution, and data point, must be integrated. A great place to start is by evaluating these five questions:

1. Can it be digital? – Many dealerships have a digital contracting solution, they just don’t use the eSign feature. A solution that you already use that has digital capabilities will make it faster and easier to get up and running with e-contracting.
2. Is a digital version allowed by your financial partners and states where you do business? – More states are adopting e-contracting, but there are still hold-outs. The same holds true for lending partners. Do your homework to make sure a digital process is possible before moving forward.
3. Does your OEM currently work with a specific solution that compliments other solutions already in place? –Many OEMs have a preferred partner so investigate how that vendor will work with current solutions, how documents are exported, and how documents are archived.
4. Is the cost feasible? Hidden costs are common, especially when it comes to implementation fees. Also factor in the cost of delegating an employee, or hiring someone new, to manage the implementation and ongoing process.
5. Does your solution integrate on a granular, detailed level? Can you customize pieces of a deal that need to be customized? – Deals get complicated when incentives, special programs, and warranties are added in. The best solutions can handle these types of customizations.

The key here is to identify the hurdles BEFORE you make the commitment. If any of the questions above force you to question the answer, you need to do the research to plan a proper strategy.

E-contracting is the future of automotive retailing – but the complexity of auto deals means there are still hurdles to overcome. Now is the time to do the behind-the-scenes homework and evaluate solutions, your sales processes, and your current technology, to prepare for the online evolution. 

It has been about 5 years since I worked as a controller in a dealership, and many things have changed in the auto industry since then. One thing I am surprised to see has not changed is the lack of designated compliance officers. We didn’t have one then, and most dealerships still don’t have one today. 

Compliance officers can protect dealerships from liabilities and hefty fines. Yet, this position is rare. Only 14 compliance officers were accounted for in the NADA 2018 Dealership Workforce Study, according to ESI Trends, a Largo, Fla., consulting firm that conducts the study.

While this data is a few years old, with the pandemic, it most likely hasn’t improved, and current numbers could well be even lower.

The auto retail business is one of the most regulated in the country and yet, the compliance officer post is largely assumed to be a secondary job responsibility. In fact, it is generally tacked on as a formality to an overtaxed position.

This is a huge risk. If policies for finance, marketing, or sales do not meet federal and state regulations, your dealership could be in for huge penalties.

I’d argue the risk is even higher now. The abnormal market created by COVID-19 has pushed more consumers to research and purchase vehicles online. As a result, the risks of identity theft and fraud have risen dramatically. Ignoring the red flags of identity theft – or unintentionally violating them – can result in fines up to $3,500 per violation.

You also have to protect your dealership from carelessness. Leaving sensitive customer paperwork – like a photocopy of a driver’s license – out in plain sight can result in fines as high as $11,000 in some states. Failing to maintain your dealership’s banking license can result in a 90-day license suspension, effectively paralyzing your sales.

As dealerships across the country regain momentum, rethink hiring, and begin to bring staff back, now is the time to prioritize the compliance officer position. This person can ensure the protection of your bottom-line, legal liability, and brand reputation.

A good candidate may or may not have dealership experience, but a background in accounting and/or finance should be a priority. But, you don’t want just a numbers person. An effective compliance officer must also be able to form relationships and trust with employees at all levels of your dealership.

This is important because it falls to the compliance officer to explain the motives and reasoning behind why something can or cannot happen. Once employees understand the “why,” they are less resistant to change and more likely to follow proper policies.

There will be pushback. Your employees may feel the compliance officer is there to make their jobs harder, when in actuality, he or she is protecting managers’ jobs and the rest of your dealership. Top-down support can help break-down resistance.

Your senior leaders should create clear channels of communication between the compliance officer and the rest of the dealer group. They should support employee trainings on a regular basis, and defer to the compliance officer in instances of employee pushback.

Part of setting a compliance officer up for success is greenlighting the right tools and third-party partners. For example, an electronic document management solution makes it easy and fast to retrieve and review deal jackets flagged by compliance software. It also helps with overall compliance since customer information is safeguarded in the cloud instead of in overflowing file cabinets or document boxes. Third-party compliance partners help the compliance officer stay on top of issues and changing regulations before there’s a problem.

The responsibilities of the compliance officer may differ from dealership to dealership, but in general daily tasks include walking the floor to ensure no papers with customer information are left lying on desks, prepping/maintaining safety inspection stickers and FTC Buyer Guide postings, staying up to date with state licensing requirements, and performing regular parts and service audits.

The compliance officer also evaluates third-party vendors responsible for maintaining information technology, banking information, and customer data, to ensure ongoing compliance. An electronic document management platform with contract query by vendor and comparison capabilities is helpful here as it allows this task to be done with a few keystrokes, instead of digging through paper files.

As your dealership regains momentum and you think about hiring again, consider adding a dedicated compliance officer to your team. Don’t find out after the fact about infractions and pay fines, or take a hit to the brand you’ve spent years building. Invest in compliance today and protect your business far into the future.

A recent article in Automotive News showcased how the overall market for DMS software is in flux with disrupters cracking the decades-old duopoly of CDK and Reynolds and Reynolds. NADA 2021 proved the point with as many as 20 companies exhibiting DMS software. If you’re one of the many dealerships who recently signed with a new provider, you’re going to need to buckle up.

As a Comptroller for many years, I know first-hand that changing systems is an tough process. It’s often likened to a heart transplant since the DMS is your central operating system and data repository. Yet, proper planning before, during, and after the transition can make the process less painful and time-consuming, and ensure data retention and integrity. Following are the essential building blocks for the three stages of the transition for a successful DMS conversion.

Before the switch.

Leadership and advance preparation are crucial to a smooth, successful, and cost-effective transition. Ideally, your management team was part of the selection process and are already cheerleaders for the new system. Set the stage with stakeholders and employees with an all-hands-on-deck presentation that emphasizes why a new platform is needed, such as new technology, more flexibility, or better workflow. Also, remember that compensation influences motivation. Providing a bonus for managers for a successful transition can aid with buy-in.

Ask your new provider for detailed information about the training and installation schedule. Typically, it takes three to six months to get on a provider’s install schedule. Take that time to prepare your staff and try to clear calendars of vacation time so that all staff is present. Make training mandatory for all users in your dealership. If they aren’t comfortable, it’s going to be a bumpy ride.

Compile standard and custom forms. Pull the last month of deals and create a list of all the forms you used. Your new provider will need copies of all the forms for programming. Do the same for any custom forms or input fields. Trust me, if you haven’t changed providers in the past five years, you are more than likely using some customized settings, forms, or fields. Work with your Controller to unravel the spider-web of customization; the better you understand your old DMS, the better you will understand your new one.

Review current DMS services and integrations for compatibility with your new provider. It’s not uncommon to have a full turn-key DMS platform that includes server and print equipment, network gear, phone system, internet access, and security applications. A current itemized DMS bill will detail the services provided. If your new platform does not include, or is not compatible, with these services, you will need to research alternate options. The same applies to current system integrations, including your OEM, CRM, marketing platform, desking tool, and more.

Clarify DMS data conversion and DMS set-up. Before the switch, identify what data fields can and cannot be converted. Discuss with your new provider if you need an additional dealer service provider for your archive conversion, and the required format for files. This is also a good time to talk about the COLDing process, including what documents are automatically COLDed, and any costs associated with accessing archived documents. As I wrote about in a recent article, many of the large providers charge hefty fees to retrieve files in the case of an audit, for example. You can avoid this scenario by archiving data to a third-party document management platform before you make the switch. If you do need access to COLD documents in the future, you can access them with a few keystrokes and avoid additional DMS fees.

This is also the time to review and re-evaluate workflow processes. Schedule team talks to discuss what’s working and what’s not. Document the steps required by personnel to book a deal, or the flow of documents from Service to Warranty Administration. You may discover workflow inefficiencies that your new vendor can streamline, or desired automations that can be easily incorporated.

You’ve done your homework, your team has started training, and you’re a week out from your ‘Go Live’ date. Now is the time to ensure your team can re-create in-progress tickets in the new system from start to finish. In-progress tickets may be lost during the switch. Proficiency in re-creating them will save time, reduce frustration, and make for a smoother transition.

During the switch.

As soon as your new system is live, re-create those in-progress tickets and make sure to close them in your old system. Remember, if your old DMS system automatically saved a closed RO or deal to your archiving system, that document will never be converted if it’s left open; even if the RO or deal will be closed in the new system.

Next, COLD your books and perform a full month-end process in your old system. Do this even if it is the middle of the month. Repeat the process in your new system to ensure you have a redundant copy. Compare the reports from both systems for accuracy and to verify that all data fields and reports are appearing as you specified. Same reason for above: if it’s not COLDed, it won’t be converted.

Check that crucial data is being mapped to your new system. This includes HR information such as employment history and payroll, your CRM data, and scanned images of physical documents. Don’t forget your COLDed images, or assume your new provider will automatically convert them. This is typically not included in standard conversions, but your new provider will likely do it for an additional fee, if you request it. If not, identify a 3rd party provider who can perform these non-core DMS data conversions for you.

Most importantly, double-check the day and time your old system will be shut off. Trying to access your old DMS after this date will likely be costly and time-consuming. Even a long-standing relationship with your old provider will not guarantee access.

After the switch.

Move forward with confidence and continue to mentor your teams. Identify those who need extra help and pair them with high-achievers. Request on-site help from your new provider for complicated processes, such as your first payroll and month-end close. Be prepared for employee resistance and stress. Change is hard! Always focus on why you made the change and how it will positively affect employees and the company as a whole. Stay upbeat and on-message to help employees adjust faster.

Switching to a new DMS provider is never easy. But you can make it less painful and time-consuming with proper planning before, during, and after the transition. I recommend following a checklist, such as this one created by the experts at DealerTech, and leaning on your new provider for on-going training and support. Good luck and Godspeed!