There isn’t a business owner or manager out there that doesn’t want to improve their profits. Finding these profits, however, is always easier said than done. When it comes to a dealership, I have worked with many dealers who have seen their profits grow in a multitude of different ways, but one of the most consistent ways to find profits in your business is through unclaimed revenue.
So, what exactly is unclaimed revenue? It is revenue that you are entitled to charge but are not collecting. In some cases, this is happening because employees are discounting it to customers and the dealership is not aware. In other cases, it is hidden in your daily process. As gross margins are compressing on vehicle sales, and expenses continue to edge up, this source of overlooked revenue is assisting dealers in generating additional profits without more sales or cutting expenses. In most cases the unclaimed revenue is not subject to commissions, and 100% falls to the net profit of the dealership!
Find Your Unclaimed Revenue
Your next question may be “where are dealers finding this unclaimed revenue?” Below, I have identified four common areas where most dealerships can find unclaimed revenue. Let’s take a look:
1. Rental Income
One of the largest opportunities at most dealerships is revenue from your rental/loaner fleet. Whether it is gas, tolls, or charges for extended rentals, many dealers do not have processes in place to collect 100% of the revenue they are entitled to earn.
For example: currently there is a manufacturer that will pay for a rental car while a warranty repair is being completed, regardless of how long it takes. But they only pay the first four days unless the dealership resubmits the claim for additional days. In many cases, the resubmission is not completed, the customer stays in the car, and the dealer loses out on the additional revenue. Depending on the volume of rentals, this could be a significant amount of unclaimed revenue!
This area of business is often overlooked when it comes to optimizing profitability. I encourage you to reexamine your rental policies and to ensure you’re not giving away your hard-earned profits.
2. Shop Supplies
Although most dealerships charge for shop supplies, many are either under-charging, discounting on a regular basis, or just not collecting these fees at all. This area is usually non-commissionable gross, therefore most of it falls to the net profit when collected (if collected).
In order to leverage the full amount due, the dealership should complete a competitive market study to see what all the shops in their market are currently charging. Many dealers have realized they haven’t adjusted this pricing structure in many years, and as a result, are substantially lower than market rate causing them to lose revenue.
3. Warranty Rate Increase
When it comes to warranty rates, make sure that your store has leveraged the maximum rate increase available in your market. In most states there is legislation that outlines the process for obtaining the maximum increase you are entitled to for both parts and labor reimbursement. Remember: you will not get an increase if you do not submit for it.
Dealers have received significant increases by using vendors who are familiar with the laws and are able to help navigate the process to ensure their partners receive the allowed maximum.
4. Best Practices for Fees & Charges
Finally, I want to share a few best practices that almost every dealership can use to help maximize their collection of unclaimed revenue. Utilizing these practices, many of my NCM 20 Group members have achieved great success.
- Conduct regular market surveys of the fees and charges your business collects to ensure you competitive pricing.
- Document an official process for tracking, charging, and collecting fees.
- Publish and post the fee schedule so customers and employees alike can familiarize themselves.
- Lock down your employees’ ability to discount products and services in the DMS system. This will reduce any issues with unauthorized discounts or fee removals on repair orders.
- Run exception reports to monitor employee discounts.
- Align pay plans and job descriptions with the collection of all entitled revenue.
Claim Your Revenue
Optimizing your revenue stream is never the easiest thing for a business to accomplish. Unfortunately, with as complex as the automotive business can be, it’s easy to see revenue leave your store in unexpected ways. Make it a priority to take the time to evaluate dealership procedures and processes, ensuring hard-earned revenue stays in the business.