Have you ever wondered what your accounting office did with all the gross profit that you made? The difference between Sales Gross and Accounting Gross is a long-time problem in our industry. The accounting office doesn’t understand why the sales managers don’t know the right cost and the sales managers think the accounting office “messes” with their gross each month. During my workshop at the 14th Digital Dealer Conference in Orlando on May 7-9th, I’ll be discussing gross profit as a case study of why you need to run Super Reports. What are Super Reports? These are reports that do a sort of “check and balance” between operational and financial results. For example, a report of service sales and gross profit by advisors would be an operational report. The amount of service and sales gross profit on the financial statement is a financial report. They should match each other or have reconciliation. A Super Report would compare the two amounts and show any variances. A typical variance would be work in process or unapplied time adjustments. Another variance could be timing; the operational report might be based on the repair order closed date and a financial report would be based on posted date. Let’s look at some of the reasons why you might be looking for variances in gross profit.

First, the accounting office might not know what you want the gross profit to be. Because we rely on a computerized recap form, you are often forcing the accounting office to come up with an amount that an F&I manager has merely printed. F&I Managers get pressured to print a recap and get the deal into the office and might not be spending a lot of time making sure the gross profit is right. The person that we’re entrusting with reconciling the gross profit is usually not paid off of gross profit and just wants to get the deal out of their office. I might be old fashioned, but I like a sales manager to indicate somewhere the “desk” gross profit. We created a special field in DealerStar (my DMS) that is a place for the sales manager to enter the front and back gross profit amounts. Why would you want to make a poor sales manager enter the gross profit amount when the gross profit fields display nicely on the screen? Because as a deal works its way through the F&I office, aftermarket, and accounting office – they might be making entries that change that DMS calculated gross profit field. A perfect example is a due bill. As an F&I manager, I might notice that the customer has been promised new tires. I will estimate those tires and set up a due bill for $900. The mistake that I made is that the new tires were already on the vehicle when I recapped the deal. The sales manager knew this and now we’re $900 off in gross. What happens to the extra $900 credit months later when the accounting office never gets a bill for the tires? That is a secret that I’ll tell you in my workshop at the Digital Dealer Conference in Orlando.

The internal repair order process is probably the biggest culprit of missing gross. It is still a mystery to me why ROs are not closed when the vehicle is complete. Waiting for a sales manager to approve repairs that are already done is silly –there should be an approved amount BEFORE the repair is started. Enter that amount in the approval field of the Repair Order and if the repairs are going to be more, get another approval during process. When the repair are complete, no need to get another approval – just close the internal so that the cost is added to the vehicle. This is why having a fully integrated DMS helps. If your managers are using a 3rd party product to desk deals – how can they see any open repair orders or purchase orders? It might be time to simplify your whole sales process and focus on gross profit.