Warranties seem to consistently be a function that leaves excess money on the dealership’s table. From unfiled or misfiled claims to parts not returned, the list of vulnerable areas in which a dealership can lose dollars goes on. Prior to moving into the dealership accounting world, I spent 10 years as a warranty administrator and many dealerships that I encountered seemed to have some level of warranty system dysfunction. In fact, I’ve seen several dealerships with warranty losses exceeding $60,000. Though this may seem like an immaterial amount to some larger groups, it is plenty impactful to some of the single point dealerships that have experienced similar loss.
Unfortunately, to those who have already experienced this, and fortunately to those who have the opportunity to nip warranty loss in the bud, there are many simple mistakes – such as entering wrong labor codes or not following up on a suspended claim – that you can easily avoid by simply paying close attention. Rather, they are oftentimes overlooked and upper management forgets to follow up with the warranty administrator.
A Dose of Advice
In my experience working within the warranty department and as a service director, I have identified the key to a successful warranty practice. It is quite simple…organization. While it is easy to take the warranty repair order (RO) and put it aside, that pile of ROs will eventually grow and morph into something far more daunting than you intended. At this point, you are weeks behind and thousands of dollars have gone down the hole. If and when you finally sit down to file the claim(s), it is likely that you’re hoping the technician left notes legible enough so that you can figure out what the problem was and that the failed part was tagged and placed properly. Let’s face it, two weeks after the job is complete and you’ve had your hands on various other jobs, it is rare that you will recall exactly what was done to fix one isolated problem. And missing parts are as equally vexing as forgetting a problem. I can personally attest to how frustrating it is to receive a payment for a properly filed claim only to have it charged back because you could not locate the part to return.
Tips to act on NOW
In light of the commonplace frustrations those working in the warranty departments of dealerships nationwide experience, I have prepared a simple checklist of tips and reminders to help you remain organized and on top of your game.
- Create a mechanism for tracking filed claims. One example is a spreadsheet. This seems simple, sure. But you may be surprised to learn how often tools such as Excel are not taken advantage of for simple tracking purposes. This does not need to be an extravagant work of art. Instead, approach it as a document that allows you to track the claim from file date to credit date. Initial implementation may seem time consuming; however, the more familiar you become with using it and creating a system that resonates with you, it will become second nature.
- Set aside one hour every day for warranty. That is not a typo. Every day. I am well aware of how hard it can be to sit down and be left alone in the service department. It seems like every time you get a chance to sit down, someone is paging you for “line 1”. However, there are two ways around this, in my opinion. You can A) come in early or stay late, or B) tell your staff that for one hour you are not to be interrupted or bothered. It can be as simple as every time you sit down to work on warranty items, asking that the receptionist not disrupt you for one hour or until you indicate you are available again. I have used both approaches and both work.
- Communicate with the accounting office. All warranty credits should come from the factory on a monthly statement. Get your hands on a copy of this form from the office manager each month so that you may reconcile the paid claims with those you have listed on your spreadsheet (this means you must implement tip #1 for this to be effective). This is a quick way to see which claims haven’t been paid and to verify that the amounts you are requesting for repayment are what you are receiving.
- Communicate with the technician handling parts. When the technician has completed the job, ask that they habitually create a warranty tag and place it in a staging area. When you have completed filing the claim, you should be able to locate the part and move it to the parts return hold area. You can’t simply rely on the technician to put the part on the return shelf based on assumption, as you may oftentimes find the part won’t make it. Communication is key.
The abundance of paperwork and procedures is a reality in the warranty department, as is the general attitude that it results in more work than return. Nonetheless, it is revenue for your department and that which is neglected often ends up as some form of financial loss for the dealership. I encourage you to consider adopting the above suggestions and stop letting money slip through the cracks.
Author: Jeremy Jacobs
Jeremy Jacobs, DHG Dealerships assurance professional, joined DHG after a 10-year tenure in the power sports industry as a warranty administrator and service manager.