December '17

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70 • RV PRO • December 2017 rv-pro.com B U S I N E S S that have been completed, but as yet unclaimed with the manufacturer. This is an asset that is particular to the RV business, as it doesn't exist in the car deal- ership business or any other that I know of. The very best dealerships have all of their warranty work orders claimed within four days. A reasonable benchmark is to have all warranty work claimed within seven to 10 days. However, I have seen some real horror stories. I have had dealers with more than $60,000 in unclaimed warranty that was more than 12 months old. I also have seen dealers with unclaimed warranty that amounted to more than six months of their average warranty sales. To make this more painful, your technicians already have been paid after their work was completed. Unclaimed warranty will age out and the manufac- turers will refuse to pay. What causes warranty work orders to be unclaimed? There are many reasons – and none are really very good. Here are a few reasons: 1. Warranty work wasn't authorized 2. Model numbers or serial numbers were not included 3. Pictures weren't included or were inadequate 4. Initial work was authorized, but supplemental work wasn't authorized 5. The technician did a poor job with the 3 C's (condition, cause and correction) 6. The amount of work in the warranty department overwhelmed the warranty administrators 7. The departure of the warranty administrator or one of the team Warranty Accounts Receivables: These are amounts due from your man- ufacturers for warranty work completed and claimed. This sounds like a simple process, but it is fraught with opportu- nities to leak gross profit. I worked with a client and we came up with 42 steps in the warranty process. During the majority of these steps, there is the opportunity to lose gross profit. It would take another article or two to list and describe all of these steps. The goal is get 100 percent of your warranty accounts receivables collected in 60 days. However, for some man- ufacturers this number is 90 days. It also is a goal to keep your total of war- ranty accounts receivables less than two months of warranty sales. While the labor gross margins typically are above 80 percent, due to the aforementioned 42 steps, the actual gross margins run closer to 50 percent. Open Repair Orders: This asset is the value of the labor and parts for all service units on your lot. Take a look at your open repair order list sorted by date. If you have units that have been on your lot 90 days, 120 days, 180 days or even longer, these are assets that need to be converted to cash. Not to mention what this is doing to your customer satisfaction. Parts and Service Receivables: These are amounts that are due the dealership from customers that bought parts or had their units serviced, but left the dealer- ship without paying. The best dealerships consistently have $0 in this account. However, it never ceases to amaze me how these accounts can build up with amounts due from customers. The reasons for these receivables are varied and are usually due to poor pro- cesses. To correct this, put in place firm policies that units aren't released until payment has been made. If your dealer- ship has policies that allow customers to buy on account, it will require additional processes to keep them current. The answer to maximizing the col- lectability and value of these assets is: Expectations, Accountability and Con- sequences. The first step is to set your Expectations. If you don't show much interest in converting these assets into cash, neither will your employees. How- ever, if you make this very important and let all key employees know that you In good times, one of the biggest sins committed by RV dealers is that they get lax with managing their assets. If the market were to have a downturn, the dealers best prepared will have maximized the quality of their assets. This means that the asset valuation on the financial statement matches the actual value of these assets. " "

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