Increase your Cash Flow-How Much Are You Submitting in Warranty Claims?

In these tough economic times, everyone is holding onto cash as much as possible.  One way you can increase your cash flow, is to ensure you are submitting enough warranty claims to the manufacturers.

As many of you are aware, the cost to purchase your inventory from the manufacturer includes a percentage which they anticipate will be your dealership warranty submissions. In essence, you are paying up front for the warranty claims you will submit in the future. The percentage varies from manufacturer to manufacturer, but in general it runs between 4% to 8% of the purchase price of the vehicle.

With the use of a few IDS Astra reports, and some excel calculations, you can determine if your dealership is on the right track.

First you’ll need to make sure your warranty is being submitted by reviewing your Unclaimed Warranty Report (4-3-3-14), as well as your Unfinalized Work order report (4-3-2-11).

Next, you’ll need to review your Warranty Accounts Receivable via report 8-2-12, AR code = W.

In addition, print the warranty submitted report from menu 4-3-3-6, for non outstanding claims for the past year, or year to date through December.

Also, you’ll need to determine the total cost of unit inventory purchased in the past year.  There is no standard report for this; however it is a simple custom report to create with menu 11-12.  You’ll want to select all Inventory with a purchase date between January 1, 2008 and today, and sort & total it by manufacturer, as well as listing or displaying the Purchase Cost of the unit.Once you gather all this information, you can drop the numbers into excel to calculate what the % of warranty submitted for this year is as compared to the total value of inventory purchased.  If it does not fall somewhere between 4%-8%, then you will want to evaluate your procedures that are followed when your dealership receives a unit, as well as when it delivers a unit.  Somewhere in that process warranty work could be missed, be repaired as Internal expense to the dealership, or “ignored” for the customer to find and turn in later or point out at time of delivery.   A great IDS report to review to determine if Internal work is being done that possibly could be warranty work is 4-3-2-1 and run it for Work Order Type = I (Internal) only.  This will sort the report by Internal Bill code and you can then review the report to determine if all that expense was truly the result of dealership error or unit delivery PDI.

You can also perform calculations to determine how much you are submitting is being shorted by the manufacturer based on the information found in report 4-3-3-6.  Armed with this information, many dealerships are able to negotiate with the factory for additional payments for previously shorted claims.

Don’t let the manufacturers keep cash that is rightfully yours!  This exercise can help you increase cash flow, improve unit check-in procedures and make for a much more satisfied customer buying a new unit with minimal warranty repairs to be done at time of delivery since the warranty job has already been identified ahead of time by your service department.

IDS will have a web class to review this process, discuss how to create the necessary custom inventory report and setup the excel spreadsheet for calculations on Tuesday January 27 with a repeat on Thursday January 29.  If you are interested in signing up for this class, please email Mike Peoples for cost & times at m.peoples@ids-astra.com.