Digital Dealer – Sandi Jerome
“It can be frustrating to look at the expenses and deductions on your DOC because many of them don’t happen until the end of the month, but smaller variances will stand out on a daily basis.”
The DOC – or Daily Operating Control is a DMS report that is rather unique to our industry; other businesses tend to evaluate their performance quarterly or even annually. The DOC creates a daily sense of urgency for the accounting office to get all the sales posted so that key metrics can be studied and estimates of net profit generated. Over the years, the most successful managers and dealers that I met had one thing in common; they didn’t wait until the financial statement to make decisions. Each one depended on daily reports; in the morning they would look at sales closing ratios, appointments, and deliveries from the sales department and in the afternoon, they’d study the DOC to analyze the performance of the fixed operations, spot unusual expenses or deductions, and see how close the sales department “numbers” were to the sales department on the DOC. Let’s look at each of these areas and see if you’re getting the information you need to make decisions on a daily basis.
When you’re looking at the fixed operations, your four key metrics are labor gross profit percentage, parts on repair orders gross profit percentage, the gross profit on percentage of parts sold over the counter and wholesale parts gross percentage. You may ask, how much should labor gross profit be? Is 72% a good metric? What if you’re only at 68% or is 82% too high and maybe a mistake? The answer is simple; you need to create your own metric. In our profit accounting training, we do a simple exercise to determine this metric by using your labor rate, effective labor rate and the cost of your technicians. Trying to use a 20 Group amount doesn’t work if you’re comparing your gross profit to a dealer that is in another part of the country and has to pay techs a fraction of what you do. In some states, technicians must be paid overtime and are unionized. Yes, you can increase your labor rate to compensate for this to meet a metric of 72%, but some of your labor rates like warranty, insurance, extended service contracts has been set for you. After you have your metrics some DMS systems let you click to see the detail behind that metric. Reynolds + Reynolds Power has an Instant DOC and DealerStar has a Drill Down DOC that allows this. Studying this on a daily basis, exceptions like a repair order that the labor rate was drastically reduced for an advisor’s friend will stand out. Looking at this percentage at the end of the month on the financial statement hides the variance.
It can be frustrating to look at the expenses and deductions on your DOC because many of them don’t happen until the end of the month, but smaller variances will stand out on a daily basis. I can remember when we wrote off a $200 bad check and my dealer spotted it on the daily DOC and questioned it. I doubt if he would have seen it at the end of the month when it gets bundled into other items. Unfortunately, my DMS didn’t have a drill down DOC, so each of those questions had to be answered with lots of research. A common complaint is that the DMS system DOC doesn’t have the analysis that your managers need and it is often ignored, so you might consider getting a custom DOC that is created in Excel and using a tool to email that daily to each manager.
The sales department portion of the DOC can often be dismissed as “not being current” because of the amount of deals not posted, but that is something to look for on a daily basis. If your sales department is reporting 57 new and 68 used sold, but there are only a dozen shown on the DOC, then that is your problem. You need to find out what is missing in your process that doesn’t get the deals posted quicker. It is rarely an issue that the accounting office isn’t doing their work; more common is that the deals are not in the office yet. If you can cut down that time from sale to posting, then you’ll have a tighter operation and better cash flow and the DOC helps you monitor this. The most important objective of any DOC is to increase profits by making decisions faster to turn a slow month into a winner!