It is almost a cliché to say that automotive retailing is evolving at a breakneck pace, but itıs true. And much of that change is the result of improvements in computer technology. The array of new products is dizzying, and itıs exciting to follow but sometimes we need a reality check. Will these new products really improve gross profit or reduce expenses? Are there lower cost solutions that will accomplish the same thing? Evolution of Reporting Fifteen years ago, reporting for most car dealers consisted of lists of data, hundreds of pages of green-bar reports that we poured through, trying to find the meaning. As a controller, my job was to review the schedules every month, plus the trial balance, journals, detail GL, payroll reports, etc. - thousands of pages of reports, (it kept me pretty busy). My dealer had even more data to sift through; he seldom had time to go through the books with me. Then I went to work for a dealer who had joined a Twenty Group. He brought back composites that compared our financial data with that of other dealers. This was better because we could see where our numbers were strong and where we were missing opportunities. Looking back, however, I realize that the 20 Group composites had their limitations. The reports were almost thirty pages long, far too much for my dealer, so he asked me to look at the numbers and give him my comments. Another problem was that the information wasnıt current; we were using last monthıs results to manage our business. It was a little like steering a car while looking through the rear view mirror. Todayıs Reporting Solutions The last two years have been revolutionary. There is an emerging cottage industry of individuals and small companies offering custom reporting solutions for car dealers. Some of the reports are quite useful. Hereıs a brief run down of the tools they employ: Real time information. Itıs not enough to know were you business is once a month. You need a daily, weekly and monthly schedule of reporting that is accurate, informative, and easy to digest. Comparative information. You should compare your numbers to industry or franchise specific benchmarks. Set the bar high. Who wants to be average? Know the cost of not solving (in dollars). If the industry standard for new vehicle sales compensation is 17% and you are at 22%, what is the annualized cost of remaining at 22%? This is sometimes called ³what if² analysis. Use color for clarity and emphasis. Have you ever wondered why the factory makes you use an expensive color form for your financial statement? It breaks the statement up, makes it easier to read, and adds emphasis. Given the falling price of color monitors and printers, shouldnıt you employ color in your internal reporting as well? Portray data graphically. The information we grasp almost instantaneously in a pie chart or bar graph might be ignored on a spreadsheet. Drill down. Go deeper than the numbers on the statement; into journals, schedules and other accounting reports. You can even pull data from other applications, like F&I and service. Here, you need tools to help you sort and sift through the reams of data that your system produces. For instance, you may not need to see all items on your warranty schedule, just the ones older than 30 days. Identify trends. It is easy to spot an expense account that is out of whack if you look at a twelve-month running history. Trend reports are especially useful when represented as a bar graph. What to Report ADP, Reynolds and UCS systems have more reports than Carter has little pills! But they arenıt always the right reports. I tend to divide reports into five broad classes: financial analysis, exception reporting, expense control, employee productivity, vehicle sales, and cash management. Financial Analysis Create a gross profit summary. The first thing every dealer wants to know is how many cars have been sold this month. It amazes me how many dealerships still use a DOC that doesnıt include the profit on cars delivered but not posted to accounting. A single page gross profit summary that includes all vehicle sales may be more useful than a 30 page report that is incomplete. Create a Super DOC. You can create a DOC that is in financial statement format and compare your mid-month results to benchmarks provided by your 20 Group. Use alarms (color, shading) to identify problem areas. You can also fine-tune the forecasting process to more accurately predict where you will be at the end of the month. For instance, if your store always delivers most of its cars at the end of the month, why use a forecast that prorates on a straight-line basis? Create a frozen asset worksheet to look at inventory and receivable levels as a percent of sales, or based on franchise specific information from your manufacturer or 20 Group. This tool can significantly improve your cash flow and reduce interest expense. Create a financial ratio report to look at key indicators such as working capital, debt/equity ratio, return on investment, etc. These are the ratios your banker is looking at, you should be aware of them also. Exception Reporting Schedule exception reports can dramatically reduce the amount of paper that controllers need to look at and provide space to record comments and action plans. Share them with your managers weekly. Some examples include contracts over three days, vehicle receivables over seven days, used cars over 60 days, new cars over 120. UCS has developed a wonderful package of exception reports called the General Managerıs Report. They can be built in Reynolds by using the ERA-Link query function. Audit exception reports can show you service advisor discounts, purchase order overrides, checks voided, etc. by user. They are an excellent way to detect fraud and abuse. Expense Reports For variable expenses, I like to apply a concept called ³Activity Based Costing². For vehicle sales, create a report that shows the profit on each unit after interest, (real or imputed) commission, F&I commission, direct advertising (for used cars) and policy. Which cars made money? For personnel expenses, you need a tool to analyze the categories on the statement. For instance, if salaries-other is up $4,000 over last month, can your payroll administrator tell you why? Unfortunately, the payroll reports your system generates probably donıt give you a break down by financial statement line item. I use a simple Excel template with the employees (in salaries other) going down the page and the various payrolls of the month running across the page. Add the payroll accrual for this month and subtract the accrual from last month and you should tie to the statement. Itıs amazing how many classification errors this process can uncover. For fixed and semi-fixed expenses that are split between schedules, I use a side by side schedule so that the dollars on the report match the dollars on the vendorıs bill. This is particularly useful for dealers who run multiple franchises out of one GL and distribute expenses between franchise and department. Employee Productivity Reports Personnel expenses represent the majority of the fixed expense in the dealership and are well within the control of your operational managers. Focusing on productivity through advance reporting can improve performance and reduce costs. The reports you create should be graphical and posted in a conspicuous location, such as the door to the shop, the conference room, or in the lunchroom. Here are a few of the many examples: Mechanic Productivity (bar graph) Service Advisor Sales (bar graph) F&I, Service Contract Penetration (pie chart) Vehicle Salesperson Performance (bar graph and pie chart) Parts counter performance (bar graph and pie chart) Vehicle Sales Reports As sophisticated as the industry has become, many sales managers still guess when it comes to ordering new vehicles from the factory or purchasing used vehicles at auction. There are a number of excellent Excel based templates that will help you do a better job of stocking what sells. Use these templates to spot more cars, improve gross profit and reduce frozen capital (also, see Technology For Controlling Your Used Inventory pg. 22). Cash Management Reports Some dealers do a great job of getting the money in the bank, but then it sits there instead of being used to reduce floor plan expense. Others review their cash balance, per books, daily, but have no idea what the balance per bank is. One of the primary functions of the controller should be to manage the flow of the dealershipıs cash. Here are some reports that will help: A comprehensive cash flow worksheet will help you monitor sources and uses of cash in your dealership. The manufacturerıs financial statement has defined our paradigm; we focus on net income. The cash flow worksheet changes the focus to cash flow, which is the purpose of being in business in the first place. A daily download from your bank will help you track deposits, outstanding checks and ACH credits daily. A daily cash summary that shows balance in bank per books, per bank, outstanding payoffs, and other key balance sheet accounts is essential. Can I Get This from My Main System? The tools you need to do this kind of reporting are readily available in a PC environment. Excel and Lotus have become so good that with a bit of time and training, most organizations should be able to achieve superior results. It seems unlikely that the big three automotive software companies will develop all of these solutions in Unix because itıs so much easier to simply buy the companies who have developed them in a Windows environment. Download or Keypunch? Reynolds & Reynolds has responded to the needs of its customers by developing ERA-Link to facilitate the download of data from all applications into Excel or Lotus. Downloading with ADP can be accomplished with ProComm, an off the shelf terminal emulation software package that ³captures² ADP reports that run on screen. Down loading has obvious appeal, but there are several steps involved and the procedure can be tricky. Itıs not for beginners. ³Scripting² the process can eliminate several of the steps, but it requires considerable expertise up front. A third option is to use Excel workbooks to create report templates. The first page can be reserved for data entry; subsequent pages are the actual reports. You can password protect the report pages to make them ³idiot proof² and have a clerical level employee do the input. Why Do It? Why bother to recreate the reporting process in Excel? The process is time consuming and may seem duplicitous. But consider the benefits: Save Time. Your managers spend too much time trying to find the meaning in those old green-bar reports! An effective schedule of reporting that shows them what they need to see without inundating them gives them more time to manage. Improve Performance. It has been demonstrated over and over again: that which is measured and tracked is almost invariably improved. Communicate Your Expectations. The benchmarking process is a great way to let your employees know what you expect and that the status quo might not be good enough. Nip Problems In The Bud. Real time reporting can help you spot small problems before they have a chance to become big problems. Get a jump on past due receivables and warranty claims before they get stale. Closing Suggestions: Review the reports with your management team regularly The dealer needs to insist on weekly managersı meetings where the reports are the framework for discussions. Some organizations have become so successful at this that they perform financial analysis weekly, and are able to estimate month-end net income to within 10%. For these organizations, the financial statement is an afterthought, something they send to their accountants and bankers, not their primary tool for financial analysis. Donıt Over-Report Develop a reasonable reporting schedule and stick to it religiously. Insist that All Transactions be Input Daily Mid-month reporting doesnıt work if the processing of car deals and payables invoices isnıt up to date. Some of the large dealer groups have discovered that in spite of all the arguments to the contrary, itıs easier to manage if you insist that the accounting office post all car deals within 24 hours of delivery. They have cross-trained their people so that on Monday morning, a billing team hacks through the weekendıs car deals and has them posted by 2:00 PM. Donıt Quit Your 20 Group You may find that with a little effort, you are able to replicate your 20 group composite in-house, but remember, you still need an external source to help you identify best practices and other means of improving the areas where your store needs work. The best source of new ideas is still other dealers!