Let’s face it, the majority of those reading this blog will agree that lot inspections (inventory audits) are one of the most time consuming and, quite frankly, annoying parts of a floorplan. However, they are actually conducted for the benefit of both the customer (dealer) and the floorplan provider. But what most dealer principals do not realize is that these inspections are like your personal credit report. When looking to obtain line increases or engage in dealership growth initiatives these lot inspections could be the deciding factor on whether you get that opportunity to achieve your goals. If all of the inventory is thoroughly accounted for and reconciling the audit is generally easy then achieving your financial goals could very well be attainable also. So, what makes for a good audit? Here are the factors that you will be judged on in order of importance:
- All sold and funded deals have been paid. This shows that you are responsible with your money and not playing the float game. There is a lot of trust that goes into extending a floorplan and these trust points are rewarded for paying on units when they are paid to you!
- Having minimal units out for repair/recon. This shows you understand the importance of having your inventory ready for resale. You cannot make money on a car that is not available for sale. Having the same unit at the repair shop for months on end is a big red flag to a floorplan provider. Flooring is not to be considered long-term financing, so you have to be quickly turning your inventory.
- Sold and unpaid units are recorded, and proper documentation is provided. Your lender wants you to sell your cars. The more the better. However, it is necessary to give the audit company the proper documentation along with dates—this behavior builds trust. At AFS, we know not everybody walks in with a 750 FICO and all needed documentation to get funded quickly. With that said though, make sure that somebody is following up on the stips. A trick that was seen in the field at one point was related to an owner who was passing late fees onto the finance manager when the deals didn’t get funded. That cut the funding time down drastically when implemented.
- Vehicles out on loan or demo. All of us have bought cars, but most of us haven’t driven a vehicle for a week on a test drive or as a loaner. So, if you are constantly telling auditors that a car is a loaner or a demo, that will not work to build confidence with your flooring provider. As an owner, if you want to have a loaner, it is best to utilize owned inventory to avoid any hiccups.
- Not following up after an audit. Maybe this should be ranked higher on the list but for now, it will be left here. And let’s spell this one out: If you don’t prioritize this item, then you are not placing value on your flooring relationship. As an owner/operator, it is in your best interest to make this process easy—it will make your providers want to do more for you.
Staying on top of these five easy tips will go a long way in showing your dealership’s credibility. What’s more is that you are encouraged to always know where your cars are. If your dealership is large, and you find that you cannot keep up, it may be time to revamp your inventory tracking method or hire someone to oversee this sole purpose. In closing, we hope you find these tips helpful!