Many dealers write off thousands of dollars in sublet repairs each year. The process might be simple; a customer’s car gets towed in and the driver gets a purchase order for the tow bill, but the next step is where failure happens; the tow bill does not get put on the repair order. In the end, the cost of the sublet repair can’t be collected from warranty claim – it is too late.
How did technology cause this problem? The problem actually started before technology, when auditors and consultants noticed that we didn’t use a purchase order system like other industries do. A new rule was born – everything needs a purchase order! Dealers ordered purchase order books and an extra layer was added to our simple accounts payable system. Don’t get me wrong, I believe in purchase orders, but in many cases the purchase orders are getting written AFTER the work is done and not as a true authorization and price limit to the repairs.
This isn’t only a problem in service. When a tire invoice comes into the office, we reject it and send it back to the sales manager for a purchase order – even though the manager had already signed the invoice, written the stock number on it, and it had everything needed to quickly post the invoice and get that cost on the vehicle before it is sold. That’s why we have so many chargebacks. But rules are rules and without a purchase order number, it goes back into the big pile on the sales manager’s desk.
In the tow bill scenario, the process goes sideways. We didn’t trust the service advisors with purchase order books – so the tow truck driver went to the parts department where those valuable purchase orders were controlled. A purchase order was written by a person who does not put sublet on repair orders.
When technology arrived, we mirrored the process in the DMS – the purchase order system is in the parts login for many older systems and an advisor does not have the security level to give the tow truck driver a purchase order number. How can we fix this? Here’s a new rule – sublet labor needs a repair order number not a purchase order number. Instead of sending a tow truck driver to the parts department, the advisor would say, “Let me give you a Repair Order number.” The advisor would search if there was already a repair order open for that VIN/License number and if not open one up quickly. The tow bill has everything they need for a new repair order; customer’s name, VIN, miles, and license number. The advisor puts the sublet on the repair order and writes the RO# on the tow bill. We’ve just cut out a ton of steps in a process that had gone wrong.
What about the tire invoice for the sales department? Could we go a step further and change the rule to vehicle additions don’t need a purchase order number, they need a stock number? I’m not sure about that because in most modern DMS systems, that purchase order shows on the desking screen and if you have a delay in your vendors getting the invoices to you – you might miss the cost. But if a vehicle addition does come into the office with a signature and stock number, could we quickly post the invoice instead of rejecting it and making a sales manager perform clerical tasks? You might not agree with me on these two issues, and as I tell the attendees of my Profit Accounting Academy, “if you agree with everything I say over these next few days, then you probably weren’t listening!” What I teach our attendees is not to toss out all the rules, but to analyze them for the damage they might be doing to our ultimate goal of making profit and protecting the assets.