Just when you’re not expecting it, a letter arrives. Seems like a normal OEM letter, but after reading it, it is much more serious than that. It’s an Audit!
Over the last two years, the manufacturers have increased their Sales Audit activities. In addition to the normal sales audits, they are using another tool: “Mail-Out Audits”. Most of them heavily use this type of an incentive audit and rely on it to reach more dealerships remotely. Even small dealerships are not immune.
What are Mail-out Audits? In lieu of Auditors coming to your dealership, a list of specific VINS (with targeted Incentives paid) is mailed to the dealer and copies of certain Deal Jacket documents are requested to be mailed back to the Audit Staff. After the in-house audit is completed, a letter is sent to the dealer advising the status and a debit is issued accordingly. In addition, if your audit reveals any out-of-line conditions, unusual patterns, ineligibilities and/or non-compliances or serious concerns, a full-blown in-dealership audit will be scheduled for your dealership in the very near future.
Think about it – why would the OEMs use this tactic? Because they can cover a larger number of dealerships in a shorter time period; maintain a sufficient number of in-house auditors and target more specific programs. At the same time, they are saving travel cost while still recouping dollars for their bottom-line. Your dollars!
So when the letter arrives, there are several things you can do to make the “Mail-Out Audit” go smoother and have better results. Here are the main items that I advise dealers to do:
Take it very serious. All efforts should be made to prepare the best package to return. Remember the alternative – a full on-site audit, which would cover a wider review period and would be more costly, as in a bigger debit.
Delegate it to one person – the right person. The most experienced person with Incentive programs and especially the rules and guidelines should review each deal jacket documents and prepare the response package. Hint: also pay attention to each VIN’s history information, including your reported CDR/RDR delivery date and sales type; it’s not always just about the Incentives.
Start on it immediately – don’t wait until the last minute. Missing forms or proof documents from customers, required documents from financial lenders or other agencies could take time to retrieve, complete and/or sign.
Correct what you can before responding, if needed. Be sure all required forms are in the deal, forms completely filled-out and signed by the customers and dealership. Copy, explain and send any other supporting documents as further explanations, if needed.
Review the entire package before mailing. Know what is being mailed-in. Meet with the delegated employee and your Office Manager/Controller once the request is completed; review the package so you are aware of non-compliances, other issues, short-comings and their potential impact and your risk or debit exposure.
Reply by the deadline. This is very important. Be sure your package arrives to the Audit Staff by or before the stated due date. If there is a rare or usually circumstance for a delayed response, call the Audit Manager immediately for consideration (note: be cautious during the conversation to not create any other ‘red flags’ or concerns). Otherwise, any late or no replies will cause ALL incentives paid on EVERY requested VIN to be debited back to the dealership.
After the request is mailed, one other thing should be addressed. If there were any non-compliances or other issues found during the mail-out response process, it would be in your best interest and worthwhile to have an in-house in-depth Incentives Compliance Review conducted immediately. It will avoid or reduce the debit when the Auditors do show up in person. It could only be a matter of time before they do.