Digital Dealer - June 2019 - 19

meager numbers, they still
aren't sure why. How does
a daily decision-maker
thrive with no understanding of their ultimate scoreboard? And How much of
this fact is tied to constant
dealer turnover?
One reason for the lack
of intimate financial training
is the reality of both successful and unsuccessful
dealer department managers having more to do with
their particular franchise
and location, then their
actual management abilities
in many situations. Take an
esteemed Honda manager
located in a hot financial
and social district, then
transfer them to a Kia store
in the downer part of town
and see what happens. You
get the point.
This isn't a knock on
that particular boss; it's
that the right environment
can overcome the need to
learn financials, ultimately
not the best situation in the
traditionally up and down
long-run. That brings me
to trending. In the aforementioned dealer group,
we have been continually
completing department
financial tracking (statement
trending) forms I introduced
several decades ago. Here,
the monthly data and related calculations are entered
and tabulated to monitor
many financial trends, looking for any pending trouble
areas against forecasts,
or even accounting errors
(yes, those happen more
often than you know).
TRENDS ARE TRENDY

When I conduct the
financial workshops, we

IT'S EASY TO SEE
THE NEED FOR MINIDEPARTMENT CEOS
TO BE PRIVY TO, AND
MANAGING THEIR OWN
DEPARTMENT'S RESULTS,
CONSIDERING THE
LITERALLY THOUSANDS
OF NUMBERS INVOLVED
EVERY FOUR OR SO
WEEKS."
always enter the latest
data and discuss the
trends and merits of the
measurements, especially
the wherewithals of critical
margin management. These
comprehensive sessions
result in subordinates
re-entering their positions
with a revised view of the
many decisions made by
top management, grasping
why a serious profit must
be earned for their business
and related employment
to survive.
An eye-opener exercise is demonstrating how
a dealership can earn a
$50,000 profit and have no
ready cash to make payroll.
If you haven't owned or
been totally responsible for
an enterprise, big or small,
you are probably clueless to
the realities of the numbers
- no fault of yours, just the
circumstance.
For some reason(s),
I will initiate a scheduled
hour or so monthly financial
statement review with dealer personnel, which is done
for a time, then it stops.
I am sure a hefty piece
of the reason is the daily

demands from customers,
employees, factory personnel, maintenance issues,
accidents, etc., which tend
to dominate management
time. On the other hand,
the departments somehow survive when the top
people are on vacations or
otherwise away for days -
maybe just phenomenon
or plain luck. Ignoring the
ultimate numbers scoreboard ultimately will create
some failures, if not today,
then later; but always.
THE BOTTOM LINE

The bottom line here is, in
fact, more than the bottom
line. Glancing at the net
profit each month is not the
end-all exam, but rather the
beginning of investigating
and understanding the
actual financial performance
including the many volumes, margins, expenses,
inventories, and receivables
of multiple departments. It's
easy to see the need for
mini-department CEOs to
be privy to, and managing
their own department's
results, considering the literally thousands of numbers
involved every four or so
D I G I TA L D E A L E R . C O M

weeks. Beyond that, sharing financials with subordinates so that there is an
understanding acceptance
of managements' many decisions affecting them and
others is just smart.
Probably the most ignored
parts of the financial statement eating up cash each
month are the department
inventories in the asset
sections. Sadly some manufacturers have chosen to
combine some inventories
on their financial statement
makeup so that individual inventories cannot be
viewed easily.
In any event, I have an
easy to use Excel workbook, including guides with
which you can analyze your
service, body shop, and
parts departments each
month. If you want a copy,
send me a note and put on
the subject line: "Inventory
Studies." It might be nice to
see where at least some of
your cash is hiding if it really
exists.
ED KOVALCHICK has
traveled the world training and
consulting in fixed operations
for manufacturers and dealers.
His extensive background
includes master technician
status, independent shop owner,
dealer with all Chrysler & Nissan
franchises, and founder of Net
Profit Inc., fixed operations
consulting and training. He is
a graduate of the University of
Louisiana and has served as
state president of the Automotive
Service Councils, and the
advisory boards of Wyo Tech
and Virginia College. He has
been a regular columnist and
conference presenter with
Dealer Magazine and Digital
Dealer since 1995. EMAIL:
Ed@NetProfitGroup.com.

JUNE 2019

19
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Digital Dealer - June 2019

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